Relevant and even prescient commentary on news, politics and the economy.

Healthcare Costs and Its Drivers Today

I have been doing my typical reading on healthcare in the US and ran across several articles which seemingly come together at various points in the dialogue and are written by different authors. I decided to tie them together into a much wider and telling story.

An interesting point being was made by MedPage Today’s Dr. Milton Packer on his blog, “people suffer and die because Payors (Healthcare Insurance) is cost effective.” He starts his discussion on the opiate epidemic in the US, opiates are being prescribed by doctors for pain relief and . . .

“Patients are becoming addicted to opiates after the initial 10 day prescription with one-fifth of patients still using opiates a year later. There is no need to prescribe opiates as other less addictive pain-relief formulations are available, which are not commonly prescribed.” This raises the question of why?

Payers will not pay for the alternatives. The less-addictive opiates are more expensive and payers have declined to support them. Patients get addicted because prescribing for the lower cost and highly addictive opiates saves the payers money initially (me).

September 17, 2017, the New York Time and ProPublica (independent, nonprofit investigative journalism organization) collaborated on an article concerning the opiod epidemic in the US.

At a time when the United States is in the grip of an opioid epidemic, many insurers are limiting access to pain medications that carry a lower risk of addiction or dependence, even as they provide comparatively easy access to generic opioid medications.

The reason given: Opioid drugs are generally cheap while safer alternatives are often more expensive.

While the pharmaceutical manufacturers, distributors , and doctors have come under scrutiny; insurance companies and the pharmacy benefit managers (CVS Caremark, Express Scripts and OptumRx) make the final decisions as to what is covered. It could be something as simple as a higher tier and deductible to block usage.

A little side trip here and a continuation of the above. A week or so ago, I ran across another MedPage Today article by Dr. Packer; “ Who Actually Is Reviewing All Those Preauthorization Requests and How the System Works.” Dr. Packers was giving a talk on advances in medicine with regard to heart failures to a room of about 20 or so doctors who were retired.

Since many of them were no longer involved in active patient care, he wondered why they might want to hear a presentation on new advances in heart failure. Here was their answer:

Doctors: “We no longer care for patients, but we care about what’s going on. You see, most of us are employed by insurance companies to do preauthorization for drugs and medical procedures.”

Dr. Packer: I just gave a talk about new drugs for heart failure. Are you responsible for preauthorizing their use for individual patients?

The answer; “Yes.”

So did I say anything today that was helpful? I talked about many new treatments. Did I say anything that you might use to inform your preauthorization responsibilities?

“Oh, we’ve heard about those drugs before. We are asked to approve their use for patients all the time; but, we don’t approve most of the requests. Nearly all of them are outside of the guidelines we are given.”

I just showed you evidence that these new drugs and devices make a real positive difference in people’s lives. People who get them feel better and live longer.

“Yes, you were very convincing. But the drugs are too expensive. So we typically reject requests, at least the first time. We figure that, if doctors are really serious, then they should be willing to make the request again and again.”

If the drugs will help people, how can you say no?

“You see, if it weren’t for us, the system would go broke. Every time we say yes, healthcare becomes more expensive, and that isn’t a good thing. So when we say no, we are keeping the system in balance. Our job is to save our system of healthcare.”

But you are not saving our healthcare system. You are simply making money for the company that you work for. And patients aren’t getting the drugs that they need.

“You really don’t understand, do you? If we approve expensive drugs, then the system goes broke. Then no one gets healthcare.”

“Plus, if I approve too many expensive drugs, I won’t get my bonus at the end of the month. So giving out too many approvals wouldn’t be a smart thing for me to do. Would it?”

Now before you start on insurance companies and doctors; understand, this is not as free a market place as many would assume. In all of their political wisdom, Congress favors pharmaceutical companies over doctors, insurance companies, and the welfare of the constituents. Through legislation, Congress has made it impossible for insurance companies to negotiate pharmaceutical pricing in Medicare Part D insurance and also the ACA. Furthermore with the consolidation happening in healthcare, negotiation by insurance companies with a consolidating and growing healthcare industry is becoming more and more difficult as the former does not have as great of leverage. You have read my argument calling out of Single Payor, Medicare-for-All, Public Option, etc. as the cure for today’s healthcare issues and rising cost not being enough as the ACA and Part D were specifically blocked or the cost issue unaddressed in the legislation written by Congress. If these issues are not addressed from the very beginning, we will be fighting the same issues with rising costs a decade later with other programs.

At this point, I begin to disagree with Dr. Packers as he goes on to say:

“So we spend more for healthcare than any other country in the world; but, Americans do not get the care they need. There is a simple reason. Treatment decisions are not being driven based on a physician’s knowledge or judgment. They are being driven by what payers are willing to pay for.”

It is true that patients may not get some of the healthcare they need at the time due to denial, which can be appealed to the ACA, and can be a tiring process. It could be approved, passed on to patients, resulting in higher premiums the following year, and the Part D Risk Corridor program pay for it if excessive for the present year. What Dr. Packers does not mention is the rising prices and cost of drugs being blamed by pharmaceutical company on R&D, tooling up to manufacture, etc. The counter argument is much of the R&D is funded by the US government through tax deductions and write-offs for pharmaceutical R&D and capital Overhead. Pharmaceutical profits are double digit at ~25% beating out hospital supplies and healthcare insurance, which is already limited in what can be charged back to the insured by the MLR. To blame insurance companies totally for the higher costs in healthcare is false. Furthermore, a doctor’s decision do not always lead to less costly cures or practices.

Maggie Mahar of Health Beat Blog would take the subject of costs a step farther and state Medicare will approve anything the FDA approves for usage regardless of the quality of outcome when measured against older proven treatments. Notably the VA does limit its pharmacy and its care is rated higher than that of today’s commercial, for-profit healthcare to which most citizens are exposed.

Dr. Donald Berwick, President Obama’s proposed appointment for Medicare and who was in charge of Medicare and Medicaid for 17 months stated;

“20 to 30 percent of health spending is ‘waste’ that yields no benefit to patients, and that some of the needless spending is a result of onerous, archaic regulations enforced by Medicare and Medicaid.

He listed five reasons for what he described as the ‘extremely high level of waste.’ They are overtreatment of patients, the failure to coordinate care, the administrative complexity of the health care system, burdensome rules and fraud.

Much is done that does not help patients at all and many physicians know it.”

That is the same Medicare/Medicaid being touted by many proponents today as an alternative.

Speaking of costs and pricing for pharmaceuticals, there have been recent incidents of skyrocketing costs on particular drugs. A short while ago, I wrote a post concerning the appointment of Alex Araz as the new HHS Secretary replacing Dr. Tom Price. Formerly, Alex Araz was the CEO of the pharmaceutical giant Eli Lilly & Co.’s U.S. division. He also served under George W. Bush administration as the HHS General Counsel and Deputy Secretary. During that stint, he received praise for his management competence with the HHS; although, he did not have a healthcare background prior to this position.

Here it gets interesting when examining what took place during his tenure with Eli Lilly. One of the leading costs identified in pharmaceuticals increases has been in the rising cost of diabetes medication.

“While the Tweeter-in-Chief, Trump tells us presidential campaign contributor Alex Azar will be a ‘star’ who will lower prescription prices,”

Public Citizen’s Peter Maybarduk (Director) had this to say: “Eli Lilly is notorious for spiking prices of a century-old isolated hormone during Azar’s tenure as president and vice president. Eli Lilly raised the price of Humalog by 345%, from $2,657.88 per year to $9,172.80 per year.

Maybe President Trump in appointing Alex Azar to be HHS Secretary should have asked the 6 million diabetic Americans whose insulin prices have more than tripled under Azar’s watch at Eli Lilly.”

This has nothing to do with R&D and has more to do with pharmaceutical companies controlling the market regardless of supply and throughput restricted manufacturing (capacity).

What I have tried to do is tie these articles together into one cohesive story of how the pharmaceutical industry, insurance, and healthcare can have an impact on healthcare costs. For those who are interested, my background does include working in the manufacture of hospital supplies and pharmaceuticals. Using various citations from these articles, I have tried to touch upon the impact of insurance companies, the healthcare industry, government intervention under the HHS, one particular Med in the market place, etc. Overall, what is going on in the marketplace.

Another article, I read the other day gets into the foundation of what is happening based upon a recently completed study by JAMA. Using this study, the Methods Man, Dr. Perry Wilson (MedPage Today) examines what is driving healthcare costs in his article Here’s What’s Really Driving Healthcare Costs using data from Factors Associated With Increases in US Health Care Spending, 1996-2013 and the US Disease Expenditure Project. Dr. Wilson breaks it down using three simple charts which I have consolidated to one.

Dr. Perry Wilson starts off making an overall point about the rising cost of healthcare from 1996 to 2013 and stating; “after accounting for inflation, healthcare expenditures increased $933.5 billion from 1996 to 2013.”

Going on: “Healthcare expenditures in the US being high and rising rapidly is nothing new, but the study appearing in the Journal of the American Medical Association identifies the exact components of healthcare that are driving those soaring costs. The data from this study suggests traditional economic forces break down in the US healthcare market.

Different chronic diseases have different patterns of price increases. The biggest increase was seen in diabetes care, as you can see here, driven largely by the rising costs of pharmaceuticals.”

The Chart breakdowns reveal the various impacts of healthcare costs moving from left to right and then downward:

• 50% of the increase in healthcare costs was simply due to higher prices.

• Inpatient care or Service Utilization (purple) went down from 1996 – 2013 as outpatient treatment increased; however, the price of the remaining inpatient care went up much more – increasing overall inpatient care spending by around $250 billion.

• Different Chronic Diseases have different patterns of price increases. The biggest increase was seen in diabetes care and driven largely by the rising prices of pharmaceuticals.

The takeaway drawn by Dr Perry Wilson: “Regardless of the disease, it is clear, the price of what we’re buying – whether a drug, an ED visit, or a hospital stay – not the amount of what we’re buying is the major driver of cost increases. Efforts to reduce the consumption of healthcare may not bend the cost curve as much as efforts to reduce its price.”

You can not make an argument about the regulation of costs “not” being one of the dynamic components of a healthcare plan given the continuous unhindered industry driven rising cost of healthcare. Yet, every healthcare plan I have read fails to mention cost regulation specifically, provide remedy for it, and many assume a natural occurrence of control.

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A Race To Suppress Academic Freedom?

A Race To Suppress Academic Freedom?

The race is between the two nations competing for global dominance, the US and China.  This post is triggered by an unnamed editorial in today’s Washington Post (probably authored by Fred Hiatt) criticizing China for imposing ideological limits on Chinese universities.  Since the recent party congress, 40 universities have set up centers for studyiing Xi Jinping Thought.  14 universities have come under attack for being “ideologically weak.”  Joint operations between US and Chinese universities must appoint a party secretary as a vice chancellor.  There have also been restrictions on the internet and other matters.  Without doubt, putting restrictions on higher education will make it harder for China to move into a position of full global leadership.

Of course, the WaPo editorial did not notice trends in US academia that also may lead to suppression of research activity and threaten the current leading position of US higher ed in the world, although there have been reports and columns commenting on these trends.  Among them are the push for political correctness coming from students, but probably more important is the assault on higher ed coming from the Trump administration.  This is seen in the attack on tax breaks for students but also the push to distort funding for research on certain topics. While not directly on higher ed, probably the most damaging has been the attack on science in government agencies, especially the EPA, with such nonsense as banning scientists who have received funding from the agencies on their scientific advisory boards, even as those receiving funding from corporations at odds with goals of these agencies are allowed to be on those boards.

Really, it looks that the two most powerful nations on the planet are having a race to suppress academic freedom and suppress the free development of knowledge in this world at a time when we need more of that.

Barkley Rosser

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Not up for Debate in the Debate Over Net Neutrality

I think of the debate over net neutrality as a fight over the rules of the game where the game is the delivery of information and entertainment. There are big corporations arguing all sides of the issue. All of them are happy to explain how the position they advocate will benefit the public. But nobody seems interested in discussing issues pertaining to the very bedrock on which the communication industry is based. That bedrock is the right of the way that providers use to place their cable through private and government property, and the right to keep others off specific bands of the public airwaves. I’m not advocating any particular change or position, mind you. I haven’t put any real thought into what is, at best an infinitesimally unlikely hypothetical question. But if rules are up for debate and can be changed, surely the uncompensated and often involuntary transfer of property rights from the public deserves some consideration. This is particularly true when the beneficiaries of said transfers used to be heavily regulated for the benefit of those from whom the property rights had been transferred.

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More on housing

(Dan here…Lifted from Bonddad blog by NewDealdemocrat):

More on housing

I’ve elaborated on my dissection of October housing permits and starts over at

Anecdotally, I know of three twenty-somethings, two of whom are single, who are blue collar workers in the construction or retail sectors, all of whom are in the process of moving out of apartments into existing homes. The story for all three is basically the same: compared with rents, the monthly payments on a house is a compelling bargain.

Whether or not the plural of anecdote is data, somehow I doubt these three people are the only ones to make that calculation — which supports the data I published a month ago pointing out that even though house prices are very high, the monthly payment is very reasonable compared with the last 30 years, and a bargain compared with soarding rents.

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There is still a Phillips Curve in the USA Too

Has the Phillips curve vanished ? There is widespread discussion of the possibility that the Phillips curve has become horizontal. I am old enough to remember when all serious economists agreed that, in the long run, it is vertical. The reason for the thought that it might be horizontal is that large important countries have unemployment lower than estimated non accelerating inflation rates, and yet still have low inflation (including low wage inflation).

I looked at the old Europe 15 (the countries which were in the European Union in 1997 so the European Commission has harmonized time series going back to the 1960s). The Phillips curve is still very clear in that data set. There is no sign that it has a lower slope in the 2st than in the late 20th century. So I wonder why people are convinced it has vanished. One possible explanation is that more attention is focused on the USA than on other countries (maybe than on all other countries put together) so I will look at the case of the Phillips curve in the USA (probably the most over studied topic in economics). It still slopes down. Even in the US, I estimate, at most, a mild reduction of the slope. This makes the puzzle more puzzling.

Before going on, I should note that I just learned that Joe Gagnon has written a much better version of this post right here .He argues that there is no inflation puzzle.

I will present the US evidence after the jump.

I will puzzle over perceptions here.

I think one key issue is that inflation hawks must argue that the Phillips curve is steep — not just downward sloping. It is hard to argue that we must accept 6% unemployment because 4.1% might lead to inflation of 2.5% for a few years starting next year. This means that a gradual increase in inflation (consistent with data from the 20th century) is considered anomalous because it contradicts the inflation hawk and generally austerian ideology. I think this is an important factor, but I have trouble determining how important using objective evidence.

Second, policy makers, commentators and even academic economists discussing real time economic issues focus intensely on the past months or, at most, the past few years. Reality is stochastic and the Phillips curve is useful but crude. We can’t really expect to be able to forecast the change in inflation from one month to the next, but we do. This means that there are constantly puzzles which turn out to have no interesting explanation. Gagnon puts this very well

The unexpected drop in inflation in mid-2017 is not particularly large in historical context. The figure displays the location of the latest observation (2017Q3), which is well within the historical Phillips curve experience.[5] In February 2017, the unemployment rate was equal to the estimated natural rate of 4.7 percent. By October 2017, it had dropped to 4.1 percent, implying that overall employment was 0.6 percentage points above potential. Based on the [accelerationist] Phillips curve, we would expect inflation to rise by about half a percentage point over the next year. But historical experience suggests that inflation may end up anywhere from 1 percentage point lower to 3 percentage points higher. In other words, the Phillips curve remains an important fundamental driver of inflation, but we should not overstate the precision with which it operates.

Third, I think there is great faith, based on little evidence , that the non accelerating rate of inflation (NAIRU is known and fairly high — definitely higher than it used to be back in the good old days (note that Gagnon does not share this view, 4.7% is about what the NAIRU was guessed to be when the term was coined). I think a very large part of this is the conviction that unemployment can not stay far above the natural rate for years and years. This is, I think, an article of faith. If unemployment can’t be far above the natural rate for years, fact that unemployment is much lower than it was in recent years implies it must be far below the natural rate. Marco Fioramanti and I have written a lot about this. I just include a google search.

This is a good place to start . People who rely on bad estimates of the non accelerating rate of inflation will be surprised by observed inflation.

Fourth, the Phillips curve curves. I think the habit of linearizing for convenience misleads people. The slope of the curve is low at high unemployment rates. This is true for approximately all specifications with all data sets. But it surprises people again and again.

Fifth, finally, and importantly, I think there is an odd attitude towards the expected inflation term in the Phillips curve. The relationship estimated since the 60’s give wage inflation as expected price inflation plus a function of unemployment. The old approach was to include lagged price inflation as a variable and consider the coefficient to give expected inflation as a function of past inflation. This approach was refuted by a thought experiment (that is, it was not shown to fail empirically as an approximation to the behavior of the variables of interest). It was argued that constant high inflation must eventually be 100% expected. There are a number of responses, but the one chosen by practical people was to keep expected inflation a linear function of lags of inflation and impose the assumption that the sum of coefficients was one, then, to make things simple by using only one lag. And so the accelerationist Phillips curve was born. In this equation the change of inflation is a function of unemployment.

It wasn’t ever respectable theory, and it doesn’t fit data from the past 30 years well. It just became the conventional approach of practical people. It performed less well than more flexible models in the 20th century. It performs terribly in the 21st. This isn’t really a major change — I can’t find a specification so that the null that the relationship is the same in the 20th and 21st century is rejected. The accelerationist Phillips curve was always hard to detect, and it isn’t surprising that it doesn’t show up clearly in less than 17 years of data.

Oddly, one popular alternative to the accelerationist curve used by extremely practical people, who don’t like fancy stuff like OLS, is the orginal Phillips scatter of inflation and unempoyment. This is odd. No one (including Phillips) ever argued that there shouldn’t be any expected inflation term (expensive book warning).

That simple relationship has shifted. There was stagflation in the 70s and early 80s. This is not news to anyone. What is news, to me at least, is that, when I drop the data from 1970-1984, the remaining points in the original Phillips scatter form a curve. This would occur if expectations which were anchored except during those 15 years. I can’t resist putting the graph right here.

Quartely data from FRED Winf is the annualized rate of change of the average hourly wage of production workers (AHEPTI). Unem is the ordinary headline unemployment rate (UNRATE). Data are quarterly from the late 60s (64-69 — oddly the FRED AHEPTI series start in 1964) or first quarter of 1985 on.

After the jump, I will show another scatter and a bunch of regressions. I don’t see strong evidence that the relationship between unemployment and wage inflation has changed recently even in the USA. There is strong evidence there (as in Europe) that the coefficient on lagged inflation is much lower than it was in the 70s and early 80s. This is consistent with anchoring of expectations. A quick simple story is that expectations were well anchored until the early 70s, then de-anchored until around 1985 and have been well anchored since. I, personally, can’t tell that story, because I insist that (some people’s) inflation expectations are not anchored based on TIPS breakevens ( evidence from bond markets ). I think the explanation might be that the expectations of employers and employees who are negotiating wages are anchored, even if the expectations of bond traders aren’t.

In any case, the coefficient on unemployment is fairly stable. Various authors have noted that, in sophisticated state space/random coefficients models, the series of estimates isn’t flat, but there are not changes dramatic enough to refute the null of no change with old fashioned econometrics (a Chow test).

I think that the belief that the Phillips curve has vanished has two principle causes. Most importantly, people who look only at the last couple of years of data often see no particular pattern. Also insistence that the right specification of a Phillips curve must be accelerationist has kept people from seeing that the pattern described sixty years ago is still in the data.

Some very simple analysis of US data on unemployment and inflation (the most over analysed data in economics) after the jump.

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The Leprechaun Long Run

The more people think about the Republican proposal to cut corporate taxes the worse it looks. Most people dismiss the argument that the benefits will trickle down to workers. Supporters’ argument is that reduced taxes on profits will cause increased investment which causes higher production and wages. There are strong arguments that the tax cut won’t cause firms to invest more. But aside from that, increased investment wouln’t cause (all) of the promised increase in wages. In this post, I will, for the sake of argument, make many assumptions favorable to advocates of the tax cut.

As often, I am following Paul Krugman and thinking of tax incidence in an open economy. Among others including Jared Bernstein, he argues that advocates of the tax cut have neglected their assumption that the increased investment will require foreign funds & that foreigners don’t invest in the US as a charity and expect to be repaid. This means that, in the short run, advocates argue that foreigners will buy US assets (the US will have a capital account surplus) which means that the US will have an even larger current account deficit. The plan is to cause high trade deficits in the short run.

Krugman has a post on the dynamics of convergence which he correctly notes is insanely wonkish. I will write only about the long run — the new steady state. So the math will be relatively simple. But mostly he writes comprehensible about Leprechaun economics, which is what he names it, because the number one example of trying to grow by cutting corporate taxes is Ireland. The basic point is embarrassingly simple, since foreigners require a return on their investment, attracting it does not cause national income to increase as much as gross national product. With foreign direct investment, more would be produced in the US but a lot of the revenue would belong to the foreigners. He has written four posts on the topic (the first four hits in this search)

Another interest of his the Gravelle Geardown which discusses how Jennifer Gravelle explains why the effect of a corporate tax cut on wages would be lower than some have argued. The point of this post (if any) is that the two issues are linked — the effect on wages is reduced by the fact that the country which attracts foreign investment will have to pay foreigners returns on that investment in the new steady state. I tried to begin to argue this here (reading I see I didn’t get very far).

Some assumptions
1a) The economy is not in a liquidity trap so unemployment (and spare capacity) are at the levels targetting by the Federal Reserve Board. In practice this is like assuming that there is full employment. This means that additional investment has to crowd out something: consumption, government consumption and investment, or net exports.

1b) Consumption is not measurably affected by interest rates. This corresponds to the evidence. This is the reason supply siders have had to appeal to the open economy and foreign investment.

1c) we are talking about tax cuts without government spending cuts.

This implies that the increased investment corresponds to reduced net exports — to a larger trade deficit.

2a) firms invest until the marginal product of capital is equal to the return demanded by investors, so that return is critically important (in the real world interest rates have small effects on investment by firms & mainly affect residential investment).

2b) the production function is smooth and allows substitution of capital and labor. In fact I assume a Cobb-Douglas production function. This means that the concept of “spare capacity” doesn’t apply to the model (and vice versa the model doesn’t apply to the real world).

These are key (implausible) assumptions made by advocates for the tax cut.

3a) Capital and labor are paid their marginal products. This means that the wage measured as a quantity of domestically produced goods depends on the capital labor ratio.

3a) foreigners demand a fixed after tax real return on their investments r* which is not affected by the policy. This is the assumption that the US economy is small. Again a concession for the sake of argument to tax cut advocates.

4) for both US consumption and US investment domestically produced and imported goods are not perfect substitutes. Instead they appear in a utility function (for consumption) or what is called an aggregator for investment. I did algebra (which I won’t inflict on anyone) assuming both have the form (foreign goods)^beta(domestic goods)^(1-beta). I assumed this so the share of spending on foreign goods is fixed. This means that the ratio of quantities demanded is the inverse of the ratio of relative prices. This is, honestly, just a convenient assumption which simplifies algebra. It means that there is a valid price index — utility is the same if dollar spent divided by the price index is fixed, capital is the same if dollar investment divided by the price index is the same and production is the same if capital and labor are the same. The price index is (price of foreign goods)^beta(price of domestic goods)^(1-beta) [oh how convenient]

5) someting similar is happening outside the USA (over here) so the share of foreign spending on US exports is constant. Also, the US is small, so total foreign spending is constant. This means that the value (in terms of foreign goods) of US exports is fixed.

OK that’s about it. I might use some horrible notation. I will use e to refer to the real exchange rate, the price in US goods of a unit of foreign made goods. This means that an increase in e is a real depreciation of the dollar. I will set current e to 1, so e will always refer to the depreciation casused by the policy. I will also set the price of US made goods to 1. This means that the price index is e^beta.

OK the story.
As the economy converges to the new steady stat, the US will run trade deficits summing to the increase in US located capital due to the tax cut. This means that the US will have to run a trade surplus to pay the returns on to the foreigners. This means that, in the long run, the policy will cause a real depreciation of the dollar. e (real exchange rate) will rise.

This has two important effects. First workers are less well off for a given capital labor ratio. The capitol labor ratio determines the wage measured as an amount of domestic goods. The price index relevant for workers as consumers is e^beta times the price of domestic goods. The real depreciation makes workers poorer.

Second the product of capital is also an amount of domestically produced goods. But the cost of a unit of capital is also e^beta>1. This means that, for a given capital labor ratio, the rate of return is lower. So this means that the real depreciation implies a lower capital labor ratio is required to pay the foreigners their required rate of return.

Given the assumption of the same shares beta and 1-beta is spent on domestic and foreign goods both for consumption and investmnet, the two effects have the same magnitude for small changes in K. Both hurt US workers.

To solve for the depreciation required to finance the returns on the additional capital, I have to make some assumption about exports. I think assumption 5) makes sense. It implies that the share of foreign spending on US goods is constant, so the amount of goods exported is proportional to e (I almost wrote exports measured in units of domestically produced goods, but hey the exports *are* domestically produced goods).

This makes the closed form solution pretty simple (although not simple enough to type in plain ascii). Indeed the effect on wages of a cut in the tax on profits is reduced.

This Gravelle gear ratio is a bigger deal if a large share of spending is on imported goods (high beta) and if the share of capital is large. I’m pretty sure the closed form solution and those two statement depend a lot on Cobb-Douglas assumptions made for convnenience.

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Proposing A Judicial Coup Via A Tax Bill

Proposing A Judicial Coup Via A Tax Bill

On today’s Washington Post editorial page in a column entitled “Packing the courts like a turducken” (a deboned duck within a deboned chicken within a deboned turkey, or something like that, all for Thanksgiving, thank you), Ronald A. Klain not only reports on the actual push to pack courts with lots of young, incompetent extremists that is going on after Congress sat on judicial nominees by Obama in recent years, but also a proposal coming from a co-founder of the Federalist Society, Steven Calabresi.  He both wants to expand the judiciary by 50% and have them all appointed in the next year, but to  replace the 158 administrative law judges with lifetime appointments by the president.  The latter are currently only appointed for one term and are civil service personnel passing on issues dealing with such agencies as the EPA and the SEC.

Most particularly, he suggests that this be packed into the current tax bill, a true turducken. The only good thing about this is that it does not look like anybody in Congress is pushing it.  But if they did, this would put the US even more in the same category as nations like Turkey, Russia, and Hungary where executive authorities move vigorously to take direct control over formerly independent judiciaries.  It is bad enough the degree to which this sort of thing is actually happening as it is.

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Two Powerful Women Losing Power

Two Powerful Women Losing Power

That would be respective Angela Merkel and Janet Yellen, both reported to have lost a lot of power in today’s Washington Post.  During at least the last year, if not the last four, they have been probably the two most powerful women on the planet.

In the case of Merkel, what has happened is that she has failed to form a coalition government after last month’s election, which put her and her party in the lead, but not enough so to allow her to push through to a coalition government, with the hard right Alternative for Democracy (AfD) getting the Bundestag.  She had been trying to form a “Jamaica” coalition with the Greens and the Free Democrats, but the latter withdrew from the negotiations for reasons the WaPo story did not clarify (quality of reporting at WaPo has been declining steadily for some time).  Apparently she then made a last gasp effort to negotiate another “grand coalition” with the Social Democrats, but having lost a lot of support due to having been in such an arrangement prior to the last election, they refused.

It looks like she will call for another round of elections in January, and the AfD is crowing with delight for an apparent triumph on their part.  I guess we shall see.  In the meantime, aside from her personal embarrassment, EU-Brexit negotiations are now reportedly in a stall pattern as nobody wants to sign on to anything without a definitely in-place government in Germany to approve or disapprove of it.   Merkel may yet regain her power if the January elections go more firmly her way, although she may well be forced to step aside as Kanzler der Bundes Deutsches Republik and more completely and thoroughly lose power. Many fear the results of the latter, although if it were to be due to a government led by the SocDems, many hear might cheer.

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The Future of Colleges & Universities… And the Present

This article looks at the future of colleges and universities:

There are over 4,000 colleges and universities in the United States, but Harvard Business School professor Clayton Christensen says that half are bound for bankruptcy in the next few decades.

Christensen is known for coining the theory of disruptive innovation in his 1997 book, “The Innovator’s Dilemma.” Since then, he has applied his theory of disruption to a wide range of industries, including education.

In his recent book, “The Innovative University,” Christensen and co-author Henry Eyring analyze the future of traditional universities, and conclude that online education will become a more cost-effective way for students to receive an education, effectively undermining the business models of traditional institutions and running them out of business.

I think a bigger problem – and it isn’t limited just to the US – is that a lot of schools are putting out a large number of students with unmarketable degrees and useless “skills.” For instance, Newsweek had an article entitled Men with muscles and money are more attractve to straight women and gay men – showing gender roles aren’t progressing. It links to this study published in Feminist Media Studies by a couple of, ahem, researchers at two British universities: Coventry and Aberystwyth. Here’s the abstract:

In this paper, we analyze the website TubeCrush, where people post and share unsolicited photographs of “guy candy” seen on the London Underground. We use TubeCrush as a case study to develop Berlant’s intimate publics as a lens for examining post-feminist sensibility and masculinity in the liminal space between home/work. The paper responds to notions of reverse sexism and post-sexism used to make sense of women’s apparent objectification of men in the digital space, by asking instead where the value of such images lies. We suggest that in TubeCrush, value is directed onto the bodies of particular men, creating a visual economy of post-feminist masculinity of whiteness, physical strength, and economic wealth. This celebration of masculine capital is achieved through humor and the knowing wink, but the outcome is a reaffirmation of urban hegemonic masculinity.

Given the direction of the paper, I’d guess that the field collectively has close to a one in five chance of stumbling onto the theory of evolution over the next few decades. The probability would be higher but for some strong biases that are likely to get in the way. Regardless, though, what with On the Origin of Species being published 158 years ago, even were they to succeed at the (cough) feat of recreating Darwin’s work, it would be neither neither impressive nor useful.

But the professors who do this sort of, er, work, teach. They also have graduate students. This is a fair number of people putting in serious time and money with an expectation that what they are doing will somehow translate into improved job opportunities. All of which brings us to Stein’s Law, which is to say, if something can’t go on forever, it won’t.

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