Saturday, November 14, 2009

Krugman Excels in Two Widely Disparate Activities

It’s always impressive to see one person excel in two widely disparate activities: a first-rate mathematician who’s also a world class mountaineer, or a titan of industry who conducts symphony orchestras on the side. But sometimes I think Paul Krugman is out to top them all, by excelling in two activities that are not just disparate but diametrically opposed: economics (for which he was awarded a well-deserved Nobel Prize) and obliviousness to the lessons of economics (for which he’s been awarded a column at the New York Times).

It’s a dazzling performance. Time after time, Krugman leaves me wide-eyed with wonder at how much economics he has to forget to write those columns.

~Steven Landsburg

Chinese Food Quiz

1. Which is greater - the combined number of McDonald's, Burger King and Wendy's franchises in the United States, or the number of Chinese restaurants?

2. What is the ratio of Chinese restaurants to McDonald's franchise units in the U.S.?

3. A study by the Center for Culinary Development, a food product development company, asked children between the ages of 10 and 13 about their favorite type of food. Guess what percent said they favored Chinese food compared to the percent that said they favored American food?

Answers here and here.

Bottom Line: Globalization is good.

Markets in Everything: Cell Phone Car Ads in India

MUMBAI: Car makers like Maruti, Hyundai, Tata Motors and others have begun advertising heavily through cellphones which is generating higher buying decisions among Indians this year compared to global buyers. The mobile phone advertisements constitute 31% of buying decisions among Indians while globally this is only 8% according to the latest estimates from Carsonline.

With Universal Coverage, No More Votes to Buy

Once the whole population is covered [by health insurance], there is little political incentive to increase spending on medical care. Once the bulk of costs have been taken over by government, as they have in most of the other OECD countries, the politician does not have the carrot of increased services with which to attract new voters, so attention turns to holding down costs.

~Milton Friedman

MP: How to hold down costs? Think Canada. Long waiting lines, fewer MRI machines and fewer physicians per capita compared to the US, etc.

Friday, November 13, 2009

Majority: Health Coverage Not Gov’t. Responsibility

PRINCETON, NJ -- More Americans now say it is not the federal government's responsibility to make sure all Americans have healthcare coverage (50%) than say it is (47%). This is a first since Gallup began tracking this question, and a significant shift from as recently as three years ago, when two-thirds said ensuring healthcare coverage was the government's responsibility.

MP: Current odds on Intrade for health care reform passing with a public option by December are currently at about 5%.

More on The Case for Insider Trading: Legalize It!

Suppose, for example, that shares of Acme Inc. are now selling for $50 per. Suppose also that an insider knows that Acme’s CEO and CFO have been cooking Acme’s books to make Acme appear to the public to be more profitable than it really is. If that insider can trade on that non-public information — obviously, by shorting Acme stock — the price of Acme stock will start to fall immediately upon the commencement of such insider trading.

Any trader who buys Acme stock after this insider trading commences gets a ‘fairer’ price — a more truthful price — than that trader would have gotten if Acme’s shares were still trading at $50 due to the fact that information about Acme’s true financial state remained private and unincorporated into Acme’s share price.

To the extent that insider trading causes prices to reflect asset values more quickly and more accurately, general investors should be more confident in asset markets and, hence, more likely to invest their earnings in such markets.

Don Boudreaux at Cafe Hayek, following up on his WSJ article "Learning to Love Insider Trading."

We Never Got Close to 900,000 Jobless Claims

Jobless claims as a share of the labor force have fallen in each of the last seven months from the 0.422% peak in March, and dropped to 0.345% in October, the lowest level since last November (see chart above). In contrast, jobless claims as a share of the labor force peaked at 0.60% in the three recessions above in the 1970s and 1980s. Given the current size of our labor force (about 154 million), we would have to have had more than 900,000 jobless claims during the most recent recession to reach the level of 0.60%, which is much higher than the peak jobless claims level in April of 658,750.

Read more here at The Enterprise Blog.

Congress to Market on Healthcare: Drop Dead

Government healthcare reform sure gets a lot of media attention. In just the last month alone there have been about 13,000 new stories containing the word “government” and the phrase “healthcare reform.” In contrast, there have been only 66 news reports during the last month with both of the terms “market based” and “healthcare reform.” That’s a ratio of almost 200 stories on government healthcare for every one story about market-based healthcare—government-based “reform” has completely monopolized the debate.

Given the momentum in Congress for some kind of government healthcare overhaul, the media attention is understandable. But at the same time that Congress debates different versions of Obamacare and considers various public options, some market-based healthcare solutions have gone largely unnoticed, despite the fact that they have successfully lowered medical costs and improved both access and quality of service.

In a new article, I outline seven such examples of market-based healthcare alternatives, read it here at

Chart of the Day: Gender Gap for Top Math Scores

The chart above shows the ratio of males to females for SAT math test scores in the range between 750 and 800 (data here) between 1996 and 2008. For example, in 2008, there were 26,610 males who tested between 750-800 for the SAT math test, compared to 13,854 females in that range, for a Male-Female ratio of 1.92 to 1. In 1996, the male-female ratio for SAT math scores above 750 was 2.70. So although the ratio has decreased over time, males are still over-represented for math test-takers with scores between 750-800 by a factor of about 2 to 1.

Update: There were 704,226 males who took the SAT test in 2008, and 812,764 females. That means that 3.78% of male test-takers scored above 750 on the math test compaed to 1.70% of females above 750.

Thursday, November 12, 2009

Growth in Online Ad Revenue Turns Positive in Q3

TECH CRUNCH -- After two straight quarters of annual declines (aka, the Great Ad Recession of 2009), it looks like online advertising revenues stabilized in the third quarter. The combined online advertising revenues of Google, Yahoo, Microsoft, and AOL rose 1.2% to $8 billion. While the online advertising industry is not out of the woods yet, it might be stabilizing. Since these four companies account for such a large portion of total Internet advertising, looking at their combined advertising revenue numbers serves as a good indicator of the health of the overall online advertising industry.

Commercial Real Estate Rebounds in Canada

Canada's commercial real estate market is rebounding faster than many in the industry projected just a few months ago. The market unexpectedly caught fire in September as access to capital improved and buyers waded into the depressed market, and a full-blown recovery seems under way in major segments of the market.

"Things have changed," said PwC partner Frank Magliocco as he released the report yesterday. "Things just took off." There have been three deals worth more than $100-million in the past month - an apartment portfolio in Vancouver, as well as residential land and a downtown building in Toronto - which would have been unthinkable in July.

"If I told you in the spring that those deals would happen, you'd have told me I was crazy," said George Carras, president of tracking firm RealNet Canada Inc. "There was no way you'd have believed me, sentiment was just too low."

There have been other signs of recovery, most notably the first quarter of growth in Toronto's commercial real estate sector after 18 months of declining fortunes. Data for Calgary and Vancouver show those markets stabilizing as well, according to RealNet.

Why Compel Young Adults to Buy Health Insurance They Don't Need and Don't Want?

Barack Obama won the presidency with 66% of the vote among adults ages 18 to 29 - a larger share than any presidential candidate in decades. So it's ironic that his health plan could impose its greatest hidden taxes on young adults.

Young adults make up just 17% of the population but account for 31% of the uninsured. The legislation before Congress would force young adults to purchase health insurance at prices far higher than the market would charge. The legislation would use that hidden tax to reduce premiums for their parents, who typically have higher incomes.

Since about one-third of young adults already reject health insurance at current prices, even more of them would avoid coverage if Congress drives those prices higher. Congress anticipates that response. Each bill includes an "individual mandate," which would force U.S. residents to purchase health insurance, whether they want it or not, on penalty of fines or imprisonment.

Why would Congress compel young adults to purchase health insurance they don't want to buy, at prices higher
than they have already rejected? There are at least four possible reasons.

Read the rest here.

Jobless Claims Fall to 42-Week Low

The short view:

The long view:

WASHINGTON - Fewer Americans than anticipated filed claims for jobless benefits last week, signaling the worst employment slump in the post-World War II era is easing as the economy expands.

Initial unemployment claims fell by 12,000 to 502,000 in the week ended Nov. 7, the lowest level since January,
Labor Department figures showed today in Washington. The number of people receiving jobless benefits dropped, as did those getting extended payments. The four-week moving average of claims, a less volatile measure, decreased to 519,750, the lowest level in almost a year, from 524,250 (see top chart above).

Wednesday, November 11, 2009

Markets in Everything: Human Punching Bag

Women fuming because they still see it as a man’s world can finally take it out on the Man himself. Or one of them, at least. Chinese gym coach Xiao Lin has launched a part-time career as a punching bag for stressed-out women. Lin reportedly charges 100 yuan (about $15) for a 30-minute bash-fest.

Employer-Provided Medicine Is Completely Illogical

Two simple observations are key to explaining both the high level of spending on medical care and the dissatisfaction with that spending. The first is that most payments to physicians or hospitals or other caregivers for medical care are made not by the patient but by a third party—an insurance company or employer or governmental body. The second is that nobody spends somebody else’s money as wisely or as frugally as he spends his own.

No third party is involved when we shop at a supermarket. We pay the supermarket clerk directly: the same for gasoline for our car, clothes for our back, and so on down the line. Why, by contrast, are most medical payments made by third parties? The answer for the United States begins with the fact that medical care expenditures are exempt from the income tax if, and only if, medical care is provided by the employer. If an employee pays directly for medical care, the expenditure comes out of the employee’s after-tax income. If the employer pays for the employee’s medical care, the expenditure is treated as a tax-deductible expense for the employer and is not included as part of the employee’s income subject to income tax. That strong incentive explains why most consumers get their medical care through their employers or their spouses’ or their parents’ employer. In the next place, the enactment of Medicare and Medicaid in 1965 made the government a third-party payer for persons and medical care covered by those measures.

We have become so accustomed to employer-provided medical care that we regard it as part of the natural order. Yet it is thoroughly illogical. Why single out medical care? Food is more essential to life than medical care. Why not exempt the cost of food from taxes if provided by the employer? Why not return to the much-reviled company store when workers were in effect paid in kind rather than in cash?

The revival of the company store for medicine has less to do with logic than pure chance. It is a wonderful example of how one bad government policy leads to another. During World War II, the government financed much wartime spending by printing money while, at the same time, imposing wage and price controls. The resulting repressed inflation produced shortages of many goods and services, including labor. Firms competing to acquire labor at government-controlled wages started to offer medical care as a fringe benefit. That benefit proved particularly attractive to workers and spread rapidly.

~Milton Friedman in his 2001 article "How To Cure Health Care."

Why Central Planning Fails

Competition is a "discovery procedure," Nobel-prize-winning economist F. A. Hayek taught. Through the competitive market process, we producers and consumers constantly learn things that force us to adjust our behavior if we are to succeed. Central planners fail for two reasons:

First, knowledge about supply, demand, individual preferences and resource availability is scattered -- much of it never articulated -- throughout society. It is not concentrated in a database where a group of planners can access it.

Second, this "data" is dynamic: It changes without notice. No matter how honorable the central planners' intentions, they will fail because they cannot know the needs and wishes of 300 million different people. And if they somehow did know their needs, they wouldn't know them tomorrow.

~John Stossel

Tuesday, November 10, 2009

Rx: Wal-Mart's Healthcare Plan - $50 Office Visits, But Those Unable to Pay Will Be Treated Anyway

BANGOR, MaineComing soon to a Wal-Mart near you: walk-in health care. In Bangor, Monday marked the first day of business at The Clinic at Wal-Mart in the recently opened Stillwater Avenue Supercenter. Additional clinics will open in coming months at stores in Brewer, Palmyra and Presque Isle. Although Arkansas-based Wal-Mart has in-store clinics in many other states, the four northern Maine clinics announced Monday are the first in Maine.

Clinicians at the Wal-Mart clinics — nurse practitioners and physician assistants — can perform physical exams for participation in sports, administer tetanus shots and flu vaccines, and test for high blood sugar, strep throat, urinary tract infections and pregnancy. They will prescribe some medications, but not narcotics or psychoactive drugs.

No appointments are accepted. Patients who have to wait to be seen and are well enough to shop will be issued an electronic pager to alert them when one of the two exam rooms is available. The clinics will be open seven days a week, including some evening hours.

The Clinic at Wal-Mart accepts all insurance coverage as well as MaineCare and Medicare. Those paying cash will be charged $50 for a standard office visit, and more for any testing or vaccines. Those unable to pay will be treated and referred to Eastern Maine Healthcare Systems' charity care office to arrange discounts or installment billing.

Milton Friedman on How The Changing Meaning of "Insurance" Has Contributed to Our Current Mess

Employer financing of medical care has caused the term insurance to acquire a rather different meaning in medicine than in most other contexts. We generally rely on insurance to protect us against events that are highly unlikely to occur but that involve large losses if they do occur—major catastrophes, not minor, regularly recurring expenses. We insure our houses against loss from fire, not against the cost of having to cut the lawn. We insure our cars against liability to others or major damage, not against having to pay for gasoline. Yet in medicine, it has become common to rely on insurance to pay for regular medical examinations and often for prescriptions.

This is partly a question of the size of the deductible and the copayment, but it goes beyond that. "Without medical insurance" and "without access to medical care" have come to be treated as nearly synonymous. Moreover, the states and the federal government have increasingly specified the coverage of insurance for medical care to a detail not common in other areas. The effect has been to raise the cost of insurance and to limit the options open to individuals. Many, if not most, of the "medically uninsured" are persons who for one reason or another do not have access to employer-provided medical care and are unable or unwilling to pay the cost of the only kinds of insurance contracts available to them.

If the tax exemption for employer-provided medical care and Medicare and Medicaid had never been enacted, the insurance market for medical care would probably have developed as other insurance markets have. The typical form of medical insurance would have been catastrophic insurance (i.e., insurance with a very high deductible).

~Milton Friedman in his 2001 article "How to Cure Health Care"

Most Popular C4C Deal: Old Pickups for New Ones

WASHINGTONThe most common deals under the government's $3 billion Cash for Clunkers program, aimed at putting more fuel-efficient cars on the road, replaced old Ford or Chevy pickups with new ones that got only marginally better gas mileage, according to analysis of new data by The Associated Press.

The single most common swap — which occurred more than 8,200 times — involved Ford F-150 pickup owners who took advantage of a government rebate to trade their old trucks for new Ford F-150s. They were 17 times more likely to buy a new F-150 than, say, a Toyota Prius. The fuel economy for the new trucks ranged from 15 mpg to 17 mpg based on engine size and other factors, an improvement of just 1 mpg to 3 mpg over the clunkers.

In at least 145 cases the government reported consumers traded old vehicles that got better than or the same mileage as the new vehicle they purchased. A driver in Michigan traded a 1987 Suburban that got 18 mpg for $3,500 toward a new Silverado pickup that got only 15 mpg. An Indianapolis driver traded a 1985 Mercedes 190 that got 27 mpg for $3,500 toward a new Volkswagen Rabbit that got only 24 mpg. In at least 15 deals in nine states, owners of large pickups cashed in old trucks for between $3,500 and $4,500 toward new Hummer H3 SUVs that got only 16 mpg.

HT: Felix Salmon

Monday, November 09, 2009

Cartoon of the Day

Auto Affordability Reaches Record High (21.9 Wks.)

Note: Left scale inverted.
DALLAS/November 9, 2009 – The purchase and financing of an average-priced new vehicle took 21.9 weeks of median family income in the third quarter of 2009, according to Comerica Bank’s Auto Affordability Index. The third quarter reading improved 0.6 of a week, pushing the latest Index reading to the best affordability on record. Median family income was roughly unchanged in the third quarter. The average total cost of a light vehicle, however, fell by $800 to $25,500. The drop mostly reflected a 2.4 percent decline in the average amount spent on a new car.

"The impact of the cash-for-clunkers program cannot be isolated in the data that we use to construct our Index," said Dana Johnson, Chief Economist at Comerica Bank. "However, the average amount that consumers spent on new vehicles in the third quarter was the lowest since early 2004. That along with the monthly pattern of sharp declines in July and August strongly suggests that the federal rebate program was largely responsible for the improvement in affordability this past quarter. In all likelihood, affordability will deteriorate modestly in the current quarter now that these rebates are unavailable."

Cannabis Use in Europe

Via The Economist.

Interesting that two of the European countries known as having the some of the most liberal drug laws (Netherlands and Portugal) in the world have relatively low cannabis usage rates compared to other European countries. Here's a previous CD post on Portugal's experience with drug decriminalization.

De-Linking Health Insurance from Employment Could Possibly Cut Health Insurance Costs By 50%

Click to enlarge.

The chart above compares the average annual costs in 2009 (individual and family coverage) for: a) employer-sponsored health insurance (data from the Kaiser Family Foundation) and b) individual health insurance purchased privately (data from AHIP).

For employer-sponsored health insurance individuals pay only 17% of the total cost (employer pays 83%) and families pay 27% of the total cost (employer pays 73%), compared to private health insurance which is covered 100% by the individuals and families.

Maybe this illustrates one of the biggest problems with health care: our current system of tax-advantaged, employer-sponsored health insurance, which results in family coverage costing 111% more on average than private insurance, and individual coverage costing 62% more on average. Because of the tax advantage, and because consumers are insulated from about 75% of the full cost, there is a tendency to spend much more on health care insurance when an employer purchases it compared to when individuals pay on their own.

Solution: De-link heath insurance from employment. Jeff Jacoby has written about this here and here. Evidence shows that when families buy their own insurance they spend about half ($6,328) of what a typical employer spends ($13,375).

Update: Certainly the details (deductible, co-pays, etc.) and scope of the coverage are different between employer-sponsored and individually-purchased private insurance, as some commenters have pointed out. Another difference is that private insurance premiums are age-adjusted and young people get pretty low premiums (as low as $113 for singles and $214 for families), compared to employer-sponsored insurance which are usually priced the same for all age groups.

Government Cable

Sunday, November 08, 2009

Affordable Private Insurance is Currently Available

Click to enlarge.
According to a recent study by America's Health Insurance Plans (AHIP), "Individual Health Insurance 2009: A Comprehensive Survey of Premiums, Availability, and Benefits":

In the summer of 2009, America’s Health Insurance Plans (AHIP) conducted the latest in a series of comprehensive surveys of member companies participating in the individual health insurance market. The data on premiums and benefits are based on nearly 2.6 million policies in force during May or June 2009, covering approximately 4.2 million people.

Nationwide, annual premiums averaged $2,985 for single coverage and $6,328 for family plans in mid-2009. For single policies, annual premiums ranged from $1,350 for persons under age 18 to $5,755 for persons aged 60-64. For family policies, premiums ranged from $2,573 for policies covering children under age 18 to $9,952 for families headed by persons aged 60-64 (see chart above).

MP: Do we really need Obamacare with a public option when individuals under 40 can buy private insurance right now for about $200 per month or less (see chart above), and families in the group below 45 years old with up to 3.5 average members per family can get private insurance right now for less than $500 per month ($142 per family member)? We keep hearing how expensive health insurance is for the average person, but private insurance seems pretty affordable according to the data from AHIP, about the same or less as a monthy car payment.

Why Obamacare Won't Work: It Will Be Rational for People and Companies to Drop Insurance, Pay Fine

Martin Feldstein explains a fatal flaw of Obamacare in the Washington Post: It will be rational for individuals and companies to drop their current health insurance, pay the penalties, and wait to purchase insurance when they get sick:

A key feature of the House and Senate health bills would prevent insurance companies from denying coverage to anyone with preexisting conditions. The new coverage would start immediately, and the premium could not reflect the individual's health condition.

This well-intentioned feature would provide a strong incentive for someone who is healthy to drop his or her health insurance, saving the substantial premium costs. After all, if serious illness hit this person or a family member, he could immediately obtain coverage. As healthy individuals decline coverage in this way, insurance companies would come to have a sicker population. The higher cost of insuring that group would force insurers to raise their premiums. (Separate accident policies might develop to deal with the risk of high-cost care after accidents when there is insufficient time to buy insurance.)

In an attempt to prevent this, the draft legislation provides penalties for individuals who choose not to buy insurance and for employers that do not offer health insurance. But the levels of these fines are generally too low to cause a rational individual to insure.

Consider: 27 million people are covered by health insurance purchased directly, i.e. outside employer-based plans. The average cost of an insurance policy with family coverage in 2009 is $13,375. A married couple with a median family income of $75,000 who choose not to insure would be subject to a fine of 2.5 percent of that $75,000, or $1,875. So the family would save a net $11,500 by not insuring. If a serious illness occurs--a chronic condition or a condition that requires surgery--they could then buy insurance. Since fewer than one family in four has annual health-care costs that exceed $10,000, the decision to drop coverage looks like a good bet. For a lower-income family, the fine is smaller, and the incentive to be uninsured is even greater.

The story is similar for single people. The average cost of an individual policy is $4,800. An individual with earnings of $50,000 would face a fine of $1,250 and would therefore save $3,550 by not insuring.

In short, for those who are now privately insured through employers or by direct purchase, there would be substantial incentives to become uninsured until they become sick. The resulting rise in the cost to insurance companies as the insured population becomes sicker would raise the average premium, strengthening that incentive.

MP: What would make this choice to drop insurance and pay the penalty even more rational is the convenient, low-cost availability of basic health care from 1,200 retail clinics around the country, or through pre-paid plans like the No Insurance Club, or concierge medicine.

Cuban Blogger Yoani Sanchez Detained, Beaten

MIAMI HERALD -- Famed Cuban blogger Yoani Sanchez said Friday she and another blogger were punched and thrown violently into a car by presumed state security agents as they walked to participate in a peaceful march in downtown Havana.

Sánchez, the best-known Cuban blogger on the island and off, said she and bloggers Pardo and Claudia Cadelo and a woman friend were walking to join a "march against violence'' organized by several young musicians when they were intercepted by three men in civilian clothes. Cuba's state security service agents frequently operate out of uniform.

Here's one reaction:

It shows that the Cuba Michael Moore touts and the left praises is nothing but a vicious police goon state. This is the real Cuba. For a long time everyone wondered how Yoani could get away with the blogging she did without coming under fire from the Castroites, and well, now it looks like she can't.

I think they've struck because Castro can't stand the truth coming out about his hellhole regime, Yoani's fame is growing, and Columbia J-School recently offered her an award that the Castroites wouldn't allow her out of the country to accept. Now these animals won't stop till they get her.

HT: Mike Carlson

Update: Here's Yoani's own account of the "Gangland Style Kidnapping."