Category: Economics

A Dollar Spent on Medicaid Yields (at Most) 40 Cents of Value to Recipients

(p. C3) A . . . National Bureau of Economic Research study estimated the value of Medicaid to its recipients at between 20¢ and 40¢ per dollar of expenditure, with the majority of the value going to health-care providers like doctors and hospitals. By comparison, the Earned Income Tax Credit—a cash transfer program designed to enhance the incomes of the working poor—delivers around 90¢ of value to its recipients per dollar of expenditure. Given that more than half of Obamacare’s reduction in the numbers of the uninsured has been from its expansion of Medicaid, this makes the law look more like welfare for the medical-industrial complex than support for the needy.

For the full commentary see:

Daniel P. Kessler. “The Health of Obamacare.” The Wall Street Journal (Saturday, Dec. 12, 2015 [sic]): C3.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date Dec. 11, 2015 [sic], and has the same title as the print version.)

The NBER working paper mentioned above was later published in:

Finkelstein, Amy, Nathaniel Hendren, and Erzo F. P. Luttmer. “The Value of Medicaid: Interpreting Results from the Oregon Health Insurance Experiment.” Journal of Political Economy 127, no. 6 (Dec. 2019): 2836-74.

(Note: my title for this blog entry continues to be supported in the 2019 published version of the earlier NBER working paper.)

“A Pattern of Stumbles Across the World of Generative A.I.”

(p. B1) Days before gadget reviewers weighed in on the Humane Ai Pin, a futuristic wearable device powered by artificial intelligence, the founders of the company gathered their employees and encouraged them to brace themselves. The reviews might be disappointing, they warned.

. . .

(p. B5) Its setbacks are part of a pattern of stumbles across the world of generative A.I., as companies release unpolished products. Over the past two years, Google has introduced and pared back A.I. search abilities that recommended people eat rocks, Microsoft has trumpeted a Bing chatbot that hallucinated and Samsung has added A.I. features to a smartphone that were called “excellent at times and baffling at others.”

For the full story see:

Tripp Mickle and Erin Griffith. “Inside the Spectacular Flop of a Bold A.I. Device.” The New York Times (Friday, June 7, 2024): B1 & B5.

(Note: ellipsis added.)

(Note: the online version of the story was updated June 7, 2024, and has the title “‘This Is Going to Be Painful’: How a Bold A.I. Device Flopped.”)

When Hospitals Compete Less, Prices Rise More

(p. B10) If the fries at your local burger joint are soggy or if you’re suddenly charged $25 for ketchup, you’ll probably eat somewhere else next time. That’s the beauty of competition.

Healthcare doesn’t quite work that way. For starters, you don’t always get to choose your medical provider—your insurer often does by contracting with them. And even the insurer can’t easily walk away, either: Giant hospital systems are swallowing up big chunks of the country’s healthcare system through vertical and horizontal integration. That leaves fewer parties with which to negotiate.

If McDonald’s bought Burger King and then Wendy’s, you could always cook at home instead, but nearly everyone needs to go to the doctor or the hospital at some point. Patients also aren’t nearly as cost sensitive as they would be with other purchases because employers and insurers pick up much of the tab. They often don’t even know the price ahead of time.

Hospital executives argue that mergers lead to improved efficiency and better outcomes for patients. But, after years of rampant consolidation between hospitals, most regions in the U.S. are now dominated by a few large players. That has led to higher prices and no significant improvements in patient care.

Rising costs don’t just lead to alarmingly high medical bills—they also make all of us worse off by increasing premiums, the bulk of which are paid by the nation’s employers. That affects even people who rarely visit a doctor. As those premiums soar and employers look to offset the cost, they indirectly eat into people’s paychecks.

Over the past two decades, there have been more than 1,000 mergers among the country’s approximately 5,000 hospitals, according to a forthcoming paper in American Economic Review: Insights.

For the full commentary see:

David Wainer. “As Hospitals Grow, So Does Your Bill.” The Wall Street Journal (Friday, June 7, 2024): B10.

(Note: the online version of the commentary has the date June 6, 2024, and has the same title as the print version.)

The paper in American Economic Review: Insights, mentioned above, is:

Brot-Goldberg, Zarek, Zack Cooper, Stuart Craig, and Lev Klarnet. “Is There Too Little Antitrust Enforcement in the U.S. Hospital Sector?” American Economic Review: Insights (forthcoming).

Gates’s TerraPower Breaks Ground on Small Nuclear Reactor

(p. A16) Outside a small coal town in southwest Wyoming, a multibillion-dollar effort to build the first in a new generation of American nuclear power plants is underway.

Workers began construction on Tuesday on a novel type of nuclear reactor meant to be smaller and cheaper than the hulking reactors of old and designed to produce electricity without the carbon dioxide that is rapidly heating the planet.

The reactor being built by TerraPower, a start-up, won’t be finished until 2030 at the earliest and faces daunting obstacles. The Nuclear Regulatory Commission hasn’t yet approved the design, and the company will have to overcome the inevitable delays and cost overruns that have doomed countless nuclear projects before.

What TerraPower does have, however, is an influential and deep-pocketed founder. Bill Gates, currently ranked as the seventh-richest person in the world, has poured more than $1 billion of his fortune into TerraPower, an amount that he expects to increase.

“If you care about climate, there are many, many locations around the world where nuclear has got to work,” Mr. Gates said during an interview near the project site on Monday. “I’m not involved in TerraPower to make more money. I’m involved in TerraPower because we need to build a lot of these reactors.”

Mr. Gates, the former head of Microsoft, said he believed the best way to solve climate change was through innovations that make clean energy competitive with fossil fuels, a philosophy he described in his 2021 book, “How to Avoid a Climate Disaster.”

Nationwide, nuclear power is seeing a resurgence of interest, with several start-ups jockeying to build a wave of smaller reactors and the Biden administration offering hefty tax credits for new plants.

. . .

In March [2024], TerraPower submitted a 3,300-page application to the Nuclear Regulatory Commission for a permit to build the reactor, but that will take at least two years to review. The company has to persuade regulators that its sodium-cooled reactor doesn’t need many of the costly safeguards required for traditional light-water reactors.

“That’s going to be challenging,” said Adam Stein, director of nuclear innovation at the Breakthrough Institute, a pro-nuclear research organization.

TerraPower’s plant is designed so that major components, like the steam turbines that generate electricity and the molten salt battery, are physically separate from the reactor, where fission occurs. The company says those parts don’t require regulatory approval and can begin construction sooner.

For the full story see:

Brad Plumer and Benjamin Rasmussen. “Climate-Minded Billionaire Makes a Bet on Nuclear Power.” The New York Times (Thursday, June 13, 2024): A16.

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

(Note: the online version of the story has the date June 11, 2024, and has the title “Nuclear Power Is Hard. A Climate-Minded Billionaire Wants to Make It Easier.”)

Gates’s 2021 book, mentioned above, is:

Gates, Bill. How to Avoid a Climate Disaster: The Solutions We Have and the Breakthroughs We Need. New York: Knopf, 2021.

Many Workers Happily Accept Lower Pay if They Can Work Remotely

(p. A15) The U.S. inflation rate tumbled from June 2022 to June 2023. It was no slide down the Phillips curve of the sort that textbooks attribute to tighter monetary policy. Instead, inflation fell 6 percentage points as unemployment stayed low. It is thus a mistake to credit this episode to the Federal Reserve’s departure from low interest rates.

. . .

Employees initially reaped the benefits of remote work, because their wages reflected pre-pandemic conditions and expectations. Over time, pay adjusted and employers adapted, eventually allowing them to benefit from slower wage growth.

My research quantifies this source of wage-growth moderation. Along with the Atlanta Fed, our team asked hundreds of business executives whether remote work affected their firms’ wages. Thirty-eight percent told us their companies had relied on the work-from-home boom to moderate wage-growth pressures in the previous 12 months. Forty-one percent said their firms planned to use remote work to restrain wage growth in the next 12 months. We found that the boom reduced overall wage growth by 2 percentage points from spring 2021 to spring 2023. In all likelihood, the effects extended beyond this interval, because pay adjusts slowly.

Remote work cuts costs in other ways, too. When employees work on site only two days a week, their companies need less space.

For the full commentary see:

Steven J. Davis. “Working at Home Helped Whip Inflation.” The Wall Street Journal (Thursday, June 20, 2024): A15.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date June 19, 2024, and has the same title as the print version.)

Davis’s research mentioned above is:

Barrero, Jose Maria, Nicholas Bloom, Steven J. Davis, Brent H. Meyer, and Emil Mihaylov. “The Shift to Remote Work Lessens Wage-Growth Pressures.” National Bureau of Economic Research Working Paper # 30197, July 2022.

Starlink Gives Remote Tribes Voice, Information, and Fast Help in Emergencies

(p. 12) . . . Starlink, . . . has quickly dominated the satellite-internet market worldwide by providing service once unthinkable in . . . remote areas. SpaceX has done so by launching 6,000 low-orbiting Starlink satellites — roughly 60 percent of all active spacecraft — to deliver speeds faster than many home internet connections to just about anywhere on Earth, including the Sahara, the Mongolian grasslands and tiny Pacific islands.

Business is soaring. Mr. Musk recently announced that Starlink had surpassed three million customers across 99 countries. Analysts estimate that annual sales are up roughly 80 percent from last year, to about $6.6 billion.

. . .

. . . perhaps Starlink’s most transformative effect is in areas once largely out of the internet’s reach, like the Amazon. There are now 66,000 active contracts in the Brazilian Amazon, touching 93 percent of the region’s legal municipalities. That has opened new job and education opportunities for those who live in the forest. It has also given illegal loggers and miners in the Amazon a new tool to communicate and evade authorities.

One Marubo leader, Enoque Marubo (all Marubo use the same surname), 40, said he immediately saw Starlink’s potential. After spending years outside the forest, he said he believed the internet could give his people new autonomy. With it, they could communicate better, inform themselves and tell their own stories.

Last year, he and a Brazilian activist recorded a 50-second video seeking help getting Starlink from potential benefactors. He wore his traditional Marubo headdress and sat in the maloca. A toddler wearing a necklace of animal teeth sat nearby.

They sent it off. Days later, they heard back from a woman in Oklahoma.

. . .

Allyson Reneau’s LinkedIn page describes her as a space consultant, keynote speaker, author, pilot, equestrian, humanitarian, chief executive, board director and mother of 11 biological children. In person, she says she makes most of her money coaching gymnastics and renting houses near Norman, Okla.

. . .

Enoque was asking for 20 Starlink antennas, which would cost roughly $15,000, to transform life for his tribe.

. . .

[Allyson Reneau said] “One tool would change everything in their life. Health care, education, communication, protection of the forest.”

Ms. Reneau said she bought the antennas with her own money and donations from her children.

. . .

The internet was an immediate sensation.

. . .

They spend lots of time on WhatsApp. There, leaders coordinate between villages and alert the authorities to health issues and environmental destruction. Marubo teachers share lessons with students in different villages. And everyone is in much closer contact with faraway family and friends.

To Enoque, the biggest benefit has been in emergencies. A venomous snake bite can require swift rescue by helicopter. Before the internet, the Marubo used amateur radio, relaying a message between several villages to reach the authorities. The internet made such calls instantaneous. “It’s already saved lives,” he said.

For the full story see:

Jack Nicas and Victor Moriyama. “The Internet’s Final Frontier: Remote Amazon Tribes of Brazil.” The New York Times, First Section (Sunday, June 2, 2024): 1 & 12-13.

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

(Note: the online version of the story was updated June 21 [sic], 2024, and has the title “The Internet’s Final Frontier: Remote Amazon Tribes.”)

People Feel “Stuck” in Lives Lacking Freedom and Hope

People need more control over their lives to feel hopeful for a free flourishing future. Fewer government regulations and more innovative firm managers could allow more of us to be “unstuck,” working on challenging but doable projects that improve the world and allow fulfilment. (I discuss these issues in more depth in Openness to Creative Destruction.)

(p. 9) The hallways on the television shows I watch have been driving me mad. On one sci-fi show after another I’ve encountered long, zigzagging, labyrinthine passageways marked by impenetrable doors and countless blind alleys — places that have no obvious beginning or end. The characters are holed up in bunkers (“Fallout”), consigned to stark subterranean offices (“Severance”), locked in Escher-like prisons (“Andor”) or living in spiraling mile-deep underground complexes (“Silo”). Escape is unimaginable, endless repetition is crushingly routine and people are trapped in a world marked by inertia and hopelessness.

The resonance is chilling: Television has managed to uncannily capture the way life feels right now.

We’re all stuck.

What’s being portrayed is not exactly a dystopia. It’s certainly not a utopia. It’s something different: a stucktopia. These fictional worlds are controlled by an overclass, and the folks battling in the mire are underdogs — mechanics, office drones, pilots and young brides. Yet they’re also complicit, to varying degrees, in the machinery that keeps them stranded. Once they realize this, they strive to discard their sense of futility — the least helpful of emotions — and try to find the will to enact change.

. . .

We’re not stuck in our circumstance. We’re stuck in the ways of living that perpetuate it.

If enough of us give up the sense that things are inevitable — that we’re stuck — it’s possible that we can course-correct humanity, or at least nudge it toward a hopeful path.

There’s another more realistic option that offers a thrill and reward of its own. If we don’t let the stucktopia keep its hold on us, if we rebuke it, maybe we shift ourselves ever so slightly toward optimism, and give the system whatever small hell we can.

For the full commentary see:

Hillary Kelly. “It’s Not Your Imagination. We’re All Stuck.” The New York Times, SundayOpinion Section (Sunday, July 7, 2024): 9.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date July 6, 2024, and has the title “Welcome to Stucktopia.”)

With Metformin Patent Expired, No Firm Has Incentive to Fund $50 Million Randomized Clinical Trial to Show It Aids Longevity

The article quoted below was published eight years ago. Dr. Barzilai and his team are still, even now, trying to raise the (probably higher) funds to conduct the metformin clinical trial. Firms have no incentive to conduct the clinical trial. Since the patent for metformin (originally issued for its efficacy against diabetes) expired in the year 2000, even if the clinical trial succeeded, no firm would be able to recover in revenue the $50 cost of conducting the clinical trial. Clinical trials are so hugely expensive largely due to the large and long Phase 3 component, intended to prove efficacy. That is why I salute Milton Friedman’s suggestion that a step in the right direction would be for the FDA to only mandate the smaller and quicker Phase 1 and Phase 2 components, mainly intended to prove safety. If the total cost of the clinical trial was much lower, it might be easier to find non-profit or academic funding. (It’s hard to raise $50 million on a GoFundMe page!)

The system is set up so that cheap (off-patent) drugs like metformin do not get tested, and so do not get FDA approval for off-label uses. So the system is set up to reduce the use of low cost, but possibly effective, medicines.

(p. D5) “Aging is by far the best predictor of whether people will develop a chronic disease like atherosclerotic heart disease, stroke, cancer, dementia or osteoarthritis,” Dr. James L. Kirkland, director of the Kogod Center on Aging at the Mayo Clinic, said in an interview. “Aging way outstrips all other risk factors.”

He and fellow researchers, who call themselves “geroscientists,” are hardly hucksters hawking magic elixirs to extend life. Rather, they are university scientists joined together by the American Federation for Aging Research to promote a new approach to healthier aging, which may — or may not — be accompanied by a longer life. They plan to test one or more substances that have already been studied in animals, and which show initial promise in people, in hopes of finding one that will keep more of us healthier longer.

As Dr. Kirkland wrote in . . ., “Aging: The Longevity Dividend”: “By targeting fundamental aging processes, it may be possible to delay, prevent, alleviate or treat the major age-related chronic disorders as a group instead of one at a time.”

. . .

The team, which includes Dr. Nir Barzilai, director of the Institute for Aging Research at Albert Einstein College of Medicine in The Bronx, and Steven N. Austad, who heads the biology department at the University of Alabama at Birmingham, plans to study one promising compound, a generic drug called metformin already widely used in people with Type 2 diabetes. They will test the drug in a placebo-controlled trial involving 3,000 elderly people to see if it will delay the development or progression of a variety of age-related ailments, including heart disease, cancer and dementia. Their job now is to raise the $50 million or so needed to conduct the study for the five years they expect it will take to determine whether the concept has merit.

. . .

Several studies have . . . found that individuals with exceptional longevity experience a compression of morbidity and spend a smaller percentage of their life being ill, Dr. Barzilai and his colleague Dr. Sofiya Milman wrote in the “Aging” book.

For the full commentary see:

Jane E. Brody. “Pursuing the Dream of Healthy Aging.” The New York Times (Tuesday, February 2, 2016 [sic]): D5.

(Note: ellipses added.)

(Note: the online version of the commentary has the date February 1, 2016 [sic], and has the title “Finding a Drug for Healthy Aging.”)

Dr. Kirkland’s co-edited book mentioned above is:

Olshansky, S. Jay, George M. Martin, and James L. Kirkland, eds. Aging: The Longevity Dividend, A Subject Collection from Cold Spring Harbor Perspectives in Medicine. Cold Spring Harbor, NY: Cold Spring Harbor Laboratory Press, 2015.

One study that documents that those who live 107 or more years do not have more years of illness and morbidity (the “compression of morbidity hypothesis”) is:

Sebastiani, Paola, and Thomas T. Perls. “The Genetics of Extreme Longevity: Lessons from the New England Centenarian Study.” Frontiers in Genetics 3 (Nov. 30, 2012).

Arthur Diamond Praises The Bear in “The Bear’s Out-Stuck Neck”

My commentary on The Bear was posted to the American Institute for Economic Research (AIER) web site on Tues., July 9, 2024.

A direct link to the commentary is: https://www.aier.org/article/the-bears-out-stuck-neck/

On Facebook, I added the following comment:

“The Bear has the courage to show a passionate persevering crew of misfit chefs prioritizing merit (the food) over so-called D.E.I. (the color and gender of those who prepare the food). Courage is not the only virtue of The Bear–count also wit, plot, admirable (though flawed) characters, and intelligence. My review applies to seasons 1 and 2, and not as fully to the still-enjoyable season 3 that was posted to Hulu on June 27. At the end of season 3 we are left hanging on whether season 4 will uphold or betray the spirit of the The Bear in seasons 1 and 2.”

Wind Turbines and Solar Panels Are Destroyed by Severe Wind and Hail

(p. A15) The footage from southwest Iowa is shocking: In the trail of a tornado, a wind turbine is bent in half like a cheap straw, its hub engulfed in flames and thick black smoke, its blades on the ground.

“You’re seeing multiple of these big wind turbine towers that have been destroyed,” Zane Satre, a meteorologist for KCCI 8 News in Des Moines, told viewers. “These are big tall ones — I think they’re what, like 250 feet tall? Well that tornado took them out.”

. . .

The damage in Iowa to three turbines was part of a spell of bad weather that struck the state on Tuesday [May 21, 2024], . . .

. . .

When it comes to extreme weather and renewable energy, the larger problem is the vulnerability of solar panels to hailstorms, Mr. McLachlan said.

To reduce costs, panels have become larger over time, and the glass has become thinner, making it more likely to crack when hail strikes. That’s happening as more solar panels are being installed in the hail-prone Midwest — and as the frequency and severity of hail increase.

The standard way to protect solar panels from hailstones is to change their angle, Mr. McLachlan said, tipping them so that their surface is less exposed to direct hits. But that creates a new problem: those panels start to act like sails, catching the winds that often accompany hail, increasing the risk of blowing away.

Hail made up 54 percent of incurred costs from insurance claims for the solar sector over the past five years, according to a report from GCube last year, despite accounting for just 1.4 percent of claims. Growing losses from hail have made it harder to get insurance for solar projects, Mr. McLachlan said.

For the full story see:

Christopher Flavelle. “Giants Built for a Gale Crumple to the Ground.” The New York Times (Thursday, May 23, 2024): A15.

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

(Note: the online version of the story has the date May 22, 2024, and has the title “Tornado Pummels Wind Turbines in Iowa.”)

California Politicians Ban Test of Sprayed Seawater That Might Reverse Global Warming

Some environmentalists are only willing to cool the planet by the pain of less consumption.

(p. A14) Elected leaders in Alameda, Calif., voted early on Wednesday [June 5, 2024] to stop scientists from testing a device that might one day be used to artificially cool the planet, overruling city staff members who had found the experiment posed no danger.

. . .

The test involved spraying tiny sea-salt particles across the flight deck of a decommissioned aircraft carrier, the U.S.S. Hornet, docked in Alameda in San Francisco Bay. Versions of that device could eventually be used to spray the material skyward, making clouds brighter so that they reflect more sunlight away from Earth. Scientists say that could help to cool the planet and to fight the effects of global warming.

. . .

“The chemical components of the saltwater solution (which is similar to seawater) being sprayed are naturally occurring in the environment,” the report said. Staff recommended that the City Council allow the experiment to continue, . . .

. . .

Some environmentalists oppose research aimed at so-called climate intervention, also known as solar geoengineering. They argue that such technology carries the risk of unintended consequences, and also takes money and attention away from efforts to reduce the use of fossil fuels, the burning of which is the underlying cause of climate change.

For the full story see:

Soumya Karlamangla and Christopher Flavelle. “Leaders in California City Halt Cloud-Brightening Test.” The New York Times (Thursday, June 6, 2024): A14.

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

(Note: the online version of the story has the date June 5, 2024, and has the title “California City Leaders End Cloud-Brightening Test, Overruling Staff.”)