Racial Disparity in Wages Is Mostly Due to Racial Disparity in Skills

(p. A11) I was raised, in part, by my paternal grandmother—a phenomenal black woman born in 1925 who came of age during Jim Crow, attended Bethune-Cookman University in the early 1940s, and experienced both the promise and limitations of the civil-rights era when integrating schools in Florida in 1969. She did her best to teach sixth-graders subject-verb agreement minutes after being spat on by their parents. Her life’s journey provided unlimited content as we sat together for nearly three decades, stuck to the plastic slipcovers on her sofa, playing cards, drinking sweet tea, and talking uninhibitedly about race in America.

. . .

. . ., in graduate school, I read a 1995 paper titled “The Role of Premarket Factors in Black-White Wage Differences.” Using a nationally representative sample of more than 12,000 14- to 17-year-olds from 1979, Derek A. Neal and William R. Johnson estimated that blacks earned between 35% to 45% less than whites on average.

. . .

“We find,” they wrote in the abstract of their paper, “that this one test score explains all of the black-white wage gap for young women and much of the gap for young men.” With their approach, antiblack bias played no role in the divergent wages among women; a black woman with the same qualifications as a white woman made slightly more money. And it accounted for at most 29% of the racial difference among men, with 71% traceable to disparate performance on the AFQT. The AFQT itself was evaluated by the Pentagon, which found that black and white military recruits with similar AFQT scores performed similarly on the job—indicating no racial bias.

The paper felt like an attack on what I knew. An assault on all those conversations with my grandmother, which taught me that racism—present-tense racism—dictated black-white inequality.

. . .

I vented about my battle with Messrs. Neal and Johnson to a fellow graduate student at Penn State, a white guy from the cornfields of Southern Illinois.

. . .

I told him I was sure discrimination was a bigger factor than Messrs. Neal and Johnson were letting on, but “I just can’t get this data to cooperate.”

. . .

He pointed out how far I was straying from our Euler equations. How on any subject other than race, I would have never given in to such sloppy thinking.

. . .

Messrs. Neal and Johnson, as it turns out, aren’t bigots, and their conclusions have stood the test of time and my attempts to disprove them. I extended their analysis to unemployment, teen pregnancy, incarceration and other outcomes—all of which follow the same pattern.

. . .

Taken together, an honest review of the evidence suggests that current racial inequities are more a result of differences in skill than differences in treatment of those with the same skill.

. . .

A black kid who believes he will face daunting societal obstacles is likely to underinvest in trying to climb society’s rungs. Every black student in the country needs to know that his return on investment in education is, if anything, higher than for white students.

. . .

The solution isn’t to look away from discrimination. It does exist. But we also can’t point at every gap in outcomes and instantly conclude it’s racism. Prejudice must be measured rigorously. Statistically. Disparity doesn’t necessarily imply racism. It may feel omnipresent, but it isn’t all-powerful. Skills matter most.

For the full commentary, see:

Roland Fryer. “Disparity Doesn’t Necessarily Imply Racism.” The Wall Street Journal (Saturday, November 26, 2022): A11.

(Note: ellipses added.)

(Note: the online version of the commentary has the date November 25, 2022, and has the same title as the print version.)

The Neal and Johnson paper discussed by Fryer in passages quoted above is:

Neal, Derek A., and William R. Johnson. “The Role of Premarket Factors in Black-White Wage Differences.” Journal of Political Economy 104, no. 5 (Oct. 1996): 869-95.

(Note: the reference is linked to the NBER draft of the paper, and not to the final published version, which can obtained from academic databases such as JSTOR.)

As of January 2022, Koch Industries Had Invested $1.7 Billion into Renewable-Energy Infrastructure

(p. B10) Norwegian startup Freyr Battery and energy conglomerate Koch Industries Inc. are accelerating their plan to build a multibillion-dollar battery plant that will be among the largest to tap incentives in President Biden’s climate, tax and spending plan, Freyr said.

. . .

Koch has emerged as one of the biggest investors in batteries, a turnabout from its emphasis on fossil fuels. It has said it wants to benefit from the falling cost of renewable-energy technologies and help drive it down further. As of January [2022], it had invested a total of $1.7 billion into electric batteries, energy storage and solar-power infrastructure, according to its website.

The plan is unusual among battery projects in being dedicated primarily to the energy-storage market rather than electric vehicles.

For the full story, see:

Stephen Wilmot. “Koch Teams Up on Battery Plant.” The Wall Street Journal (Saturday, November 12, 2022): B10.

(Note: ellipsis, and bracketed year, added.)

(Note: the online version of the story has the date November 11, 2022, and has the title “Koch Teams With Startup to Build Giant Battery Factory.”)

Unintended Consequences Make “Government-Provided Health Care” a “Fiscal and Regulatory Nightmare”

(p. A17) The private plans participating in Medicare’s prescription-drug program, known as Part D, currently draw on three sources of revenue to finance prescriptions: out-of-pocket payments from patients, premium payments made by plan members, and subsidies from the federal government. In 2025, under the Inflation Reduction Act, both government subsidies and out-of-pocket payments by patients are scheduled to be cut sharply. The difference will have to be made up by premiums. But the statute inhibits this third revenue source, which is also subsidized, from increasing more than 6%. That’s hardly enough to cover inflation, let alone compensate for the other two revenue losses.

. . .

Existing plans have room to cut benefits, although the original Part D statute limits their ability to do so. As plans are under no obligation to take a loss, their other choice is to exit the market, which from the patient’s perspective means that all the benefits disappear. In essence, the Inflation Reduction Act statute may prohibit Part D plans from being economically viable, even if it doesn’t explicitly ban them.

. . .

Welcome to the fiscal and regulatory nightmare known as government-provided health care, where those writing the rules don’t understand the consequences of what they do. Democrats hate that Medicare Advantage has been available as a pseudo-private alternative to original Medicare’s single-payer arrangement. Yet they have (unwittingly?) passed a law that so thoroughly disrupts traditional Medicare as to render it the worst of the Medicare options.

For the full commentary, see:

Casey B. Mulligan and Tomas J. Philipson. “The Inflation Reduction Act Comes for Medicare.” The Wall Street Journal (Tuesday, November 22, 2022): A17.

(Note: ellipses added.)

(Note: the online version of the commentary has the date November 21, 2022, and has the same title as the print version.)

Persian King Cyrus Tolerated Diversity of Religion and Culture

(p. C12) After another year that has cried out for inspiring leadership, I grasped glimmers of optimism from Matt Waters’s “King of the World,” a biography of Persian king Cyrus the Great.

. . .

Today Cyrus is revered as a model of pragmatic, benevolent rulership.

. . .

. . . Cyrus imposed or forbade no religion, language, ethnicity, dress code or culture on his native Persians or the many other peoples he ruled. Would that this were the case for his descendants today.

For the full review, see:

Timothy Potts. “12 Months of Reading; Timothy Potts.” The Wall Street Journal (Saturday, Dec. 10, 2021): C12.

(Note: ellipses added.)

(Note: the online version of the review has the date December 8, 2022, and has the title “Who Read What in 2022: Thinkers and Tastemakers.”)

The book praised by Timothy Potts is:

Waters, Matt. King of the World: The Life of Cyrus the Great. New York: Oxford University Press, 2022.

By 2030 mRNA Vaccines May Boost Immune Response of Metastatic Cancer Patients

(p. C4) The cofounders of BioNTech recently announced that vaccines targeting cancer may be available before the end of the decade. Researchers at Duke University are already developing a vaccine that targets mutations commonly arising in people with certain types of advanced breast cancer. Using the same mRNA technology deployed against Covid-19, these types of vaccines would not be administered prophylactically but, rather, used as a treatment to trigger a stronger immune response in patients with locally recurrent or metastatic disease. When it comes to conquering breast cancer, future medical historians will have plenty to write about.

For the full essay, see:

Lindsey Fitzharris. “A Medical Historian Confronts Breast Cancer.” The Wall Street Journal (Saturday, December 3, 2022): C4.

(Note: the online version of the essay has the date December 1, 2022, and has the same title as the print version.)

Project Entrepreneur Alex Oshmyansky Switched from Nonprofit to Profit to Raise Funds to Enable Project; Let Mark Cuban Take Credit for Project

(p. B1) DALLAS—When Mark Cuban got an email in 2018 from a stranger asking if he wanted to invest in a company dedicated to bringing down the cost of prescription drugs, he replied: “Tell me more.”

Today, the Dallas Mavericks owner and entrepreneur is helping steer the fledgling startup as it takes aim at high prescription drug prices and the industry middlemen who he says keeps them that way.

The Mark Cuban Cost Plus Drug Co. PBC, born from that brief email pitch from the company’s founder, Alex Oshmyansky, buys generic drugs from pharmaceutical manufacturers and sells them directly to patients online, rather than charging their insurance providers. By cutting out intermediaries and using a transparent pricing system, the pharmacy says it charges less than rivals for drugs: a 15% profit markup on a medicine’s cost, plus several dollars in fees for shipping and labor.

. . .

(p. B4) Several startups are attempting to reinvent parts of the pharmaceutical supply chain, removing costs by taking control of reimbursement, manufacturing and distribution.

Some firms, like ProvideGx and Civica Rx, are making drugs themselves so that they can control pricing and supply volumes. Others are selling directly to patients, bypassing the middleman known as pharmacy-benefit managers that traditionally handle drug coverage for health insurers.

A radiologist and former math prodigy, Dr. Oshmyansky received his undergraduate degree from the University of Colorado at Boulder at age 18, followed by an M.D. from Duke University and a Ph.D. in math from Oxford. He had the idea for a pharmacy after growing frustrated with pharmaceutical-industry pricing practices, such as companies hiking prices dramatically on decades-old drugs.

He planted the seed for the Cuban pharmacy in 2015 when he founded Osh’s Not-for-Profit Pharmaceuticals with a mission of manufacturing generic drugs and selling them to hospitals at a small markup on its costs.

He struggled to find investors to fund a nonprofit drug company, however, and eventually transitioned Osh’s into a for-profit entity. In 2018, he secured $1 million from investors through the Silicon Valley startup-incubator Y Combinator.

A few months later, in 2018, Dr. Oshmyansky emailed Mr. Cuban at his publicly available email address.

. . .

Eventually, Dr. Oshmyansky agreed to rename the company after Mr. Cuban in a bid to trade on his celebrity and attract free publicity.

For the full story, see:

Joseph Walker. “Mark Cuban Lands a Job at an Online Pharmacy.” The Wall Street Journal (Saturday, Dec. 10, 2022): B1 & B4.

(Note: ellipses, and bracketed year, added.)

(Note: the online version of the story has the date December 9, 2022, and has the title “Mark Cuban Has New Job: Working at Online Discount Pharmacy.”)

After Getting $170 Billion in Government Subsidies, Hospitals “Were Major Financial Beneficiaries of the Pandemic”

(p. B12) . . . hospitals . . . were major financial beneficiaries of the pandemic, receiving more than $170 billion in subsidies to defray their operating losses. A study looking at the finances of more than 2,000 hospitals concluded that financial losses from Covid-19 were largely offset by government relief in 2020, keeping profit margins largely intact. What is more, says Dr. Ge Bai, a professor who conducted the study with two other academics, profit rose significantly in 2021 as government aid persisted even as non-Covid activity rebounded.

“Contrary to the public perception, the industry benefited from the pandemic,” says Dr. Bai, a professor of health policy at the Johns Hopkins Bloomberg School of Public Health.

For the full commentary, see:

David Wainer. “A Profitable Prognosis.” The Wall Street Journal (Saturday, November 5, 2022): B12.

(Note: ellipses added.)

(Note: the online version of the commentary has the date November 4, 2022, and has the title “HEARD ON THE STREET; Hospitals Say They’re Still Ailing From Covid-19. Their Investors Feel Better.”)

Philosopher Argues That Human Flourishing Has Grown With “Access to Fossil Fuels”

(p. C13) The brilliance of Alex Epstein’s recent “Fossil Future” is that he writes not as a scientific expert but as a philosopher.

. . .

What is the best course of action to improve human flourishing? His answer is clear and unapologetic: more plentiful, reliable, abundant access to fossil fuels. The climate-disaster-related death rate, he points out, is 98% lower today than it was just a century ago—largely owing to innovations powered by fossil fuels. The right way to handle climate change isn’t to reverse it but to master its effects—a thesis that is as provocative as it is intuitive.

For the full review, see:

Vivek Ramaswamy. “12 Months of Reading; Vivek Ramaswamy.” The Wall Street Journal (Saturday, Dec. 10, 2021): C13.

(Note: ellipsis added.)

(Note: the online version of the review has the date December 8, 2022, and has the title “Who Read What in 2022: Thinkers and Tastemakers.”)

The book praised by Vivek Ramaswamy is:

Epstein, Alex. Fossil Future: Why Global Human Flourishing Requires More Oil, Coal, and Natural Gas–Not Less. New York: Portfolio, 2022..

Heat Deaths Rise Mostly Due to Rise in Fragile Aging Population

(p. A17) One recent and much-cited Lancet report appears deliberately deceptive.

The study offers a frightening statistic: Rapidly rising temperatures have increased annual global heat deaths among older people by 68% in less than two decades. That stark figure has been cited all over, from the BBC and Time to the Washington Post and the Times of India, the world’s largest-selling English-language daily.

. . .

Annual heat deaths have increased significantly among people 65 and older world-wide. The average deaths per year increased 68% from the early 2000s to the late 2010s. But that is almost entirely because there are so many more older people today than there were 20 years ago, in no small part thanks to medical innovations that keep us alive longer. Measured across the same time span the Lancet maps heat deaths, the number of people 65 and older has risen by 60%, or almost as much as heat deaths. When the increase in heat mortality is adjusted for this population growth, the actual rise that can be attributed to rising temperatures is only 5%.

It is hard not to see the Lancet study’s failure to adjust this figure as a deliberate act of deception.

For the full commentary, see:

Bjorn Lomborg. “The Lancet’s ‘Heat Death’ Deception.” The Wall Street Journal (Saturday, November 5, 2022): A17.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date November 4, 2022, and has the title “Climate Change and the Lancet’s ‘Heat Death’ Deception.”)

Firms Nimbly Shift Shipping Away from Unionized and Bottlenecked California Ports

(p. B1) Sharpie maker Newell Brands Inc. is opening distribution centers in Pennsylvania and North Carolina to lessen dependence on seaports in California. Abercrombie & Fitch Co. is moving more merchandise through New York and New Jersey to avoid West Coast bottlenecks. Air-conditioning manufacturer Trane Technologies PLC is sending most of its cargo this year through ports in the South, instead of the Los Angeles area.

The hierarchy of U.S. ports is getting shaken up. Companies across many industries are rethinking how and where they ship goods after years of relying heavily on the western U.S. as an entry point, betting that ports in the East and the South can save them time and money while reducing risk.

Their reasons range from fears of a dockworkers strike along the West Coast and a repeat of the bottlenecks that roiled supply chains early in the pandemic to a reduced dependence on Chinese production and the need to get products to all parts of the country faster.

In August [2022], Los Angeles lost its title as busiest port in the nation to the Port of (p. B6) New York and New Jersey as measured by the number of imported containers. It trailed its East Coast rival again in that measure during September and October, according to the Pacific Merchant Shipping Association and ports data.

The share of all U.S. containerized cargo handled by Los Angeles and a neighboring port in Long Beach fell through the first 10 months of the year to a combined 25% as measured by weight, according to census data analyzed by Jason Miller, interim chair of Michigan State University’s supply chain management department. That was their lowest level in nearly two decades, down from a height of 33%.

Other ports benefiting from this shift include Savannah, Ga., Houston and Charleston, S.C.

For the full story, see:

Paul Berger. “New Routes for Big Business.” The Wall Street Journal (Saturday, Dec. 10, 2022): B1 & B6.

(Note: bracketed year added.)

(Note: the online version of the story was updated Dec. 14, 2022, and has the title “California Long Ruled Shipping in U.S. Importers Look to East.”)

Share of Insulin Revenues Going to Middlemen Pharmacy Benefit Managers (PBMs) Increased by 155%

(p. B12) Pharmacy-benefit managers, or PBMs, have captured a growing slice of America’s world-leading drug spending during the past decade. The spotlight could soon shift to them.

. . .

While the three largest manufacturers of insulin—Eli Lilly, Novo Nordisk and Sanofi—charge more for their products in the U.S. than they do elsewhere, their take of overall spending has been decreasing in recent years as the relative power of middlemen has grown. PBMs have steadily gained negotiating clout by consolidating and merging with large insurance companies. The three largest PBMs are owned by CVS Health Corp. (which owns insurer Aetna), UnitedHealth Group Inc. and Cigna Corp.

. . .

. . . increases in recent years have mostly been passed on to PBMs in the form of heavy discounts that are hidden from public view.

A recent study by University of Southern California scholars showed that, between 2014 and 2018, the share of a hypothetical $100 insulin expenditure accruing to manufacturers decreased by 33%. During that same period, total U.S. spending on insulin hasn’t budged, but the share of insulin expenditures retained by PBMs has increased by 155%.

. . .

“What’s happening in this market is that the middlemen are making more and more money,” said University of Southern California professor Neeraj Sood, one of the authors of the study who has previously done consulting work for drug companies.

Yet the drug-pricing provisions in the recently passed Inflation Reduction Act singularly focused on what manufacturers charge while ignoring other players that take a slice of profits farther down the chain.

For the full commentary, see:

David Wainer. “HEARD ON THE STREET; Sanders, Musk Miss the Mark on Insulin.” The Wall Street Journal (Tuesday, November 22, 2022): B12.

(Note: ellipses added.)

(Note: the online version of the commentary has the date November 21, 2022, and has the title “HEARD ON THE STREET; Elon Musk, Bernie Sanders and Others Miss the Mark Over Pricey Insulin.”)

The academic study co-authored by Sood, and mentioned above, is:

Van Nuys, Karen, Rocio Ribero, Martha Ryan, and Neeraj Sood. “Estimation of the Share of Net Expenditures on Insulin Captured by Us Manufacturers, Wholesalers, Pharmacy Benefit Managers, Pharmacies, and Health Plans from 2014 to 2018.” JAMA Health Forum 2, no. 11 (2021), doi:10.1001/jamahealthforum.2021.3409.