Posts like this are why I love OB.


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I can't believe an economist doesn't understand the effects of third party payers, doctors guilds, medicare and medicaid on the system. No, according to Robin, it's due to suppression of prices in socialist countries due to some enthusiasm factor.

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Nancy: Yes, that is true, treatments can be radically different yet effective, the preference can very well be explained by culture as well as costs. I red an article in the NYT recently about the difference in treatment of childhood cancer like leukemia in the UK and US. (Both treatments is effective and scientifically proven).

Grant: Insurance is funded by premiums... Everybody still pays more, where do you think the insurer gets the money to pay the inflated costs! You!

I briefly addressed economics of scale in my previous post, it is almost non existent with Doctors, patients requires the constant attention of one of the most highly skilled professionals on the planet(other highly skilled professionals like scientist and engineers never have any contact with the consumers paying their salaries). With hamburgers the price will temporarily spike and serve as a signal to ramp up production. Medical schools is almost completely inelastic when it comes to "production" of doctors. Their incentives is almost completely meritocratic and quality orientated, 99% of the population is already excluded by simple entry requirements alone.

So we are over consuming a resource where the supply is almost completely inelastic over the short term.

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HA, good points. It does make sense to over-consume safety from vivid dangers, because it takes less cognitive resources to identify them. But we still seem to over-do it don't we?

Most people seem to think we'd over-consume airline safety (especially relatively to automotive safety) even if the FAA wasn't around to make people over-consume. Some of that may be explainable as limited information, because some people don't realize how safe flying is. But I'd bet most people who fly realize that it is almost ridiculously safe (at least in the USA).

I'm not sure if we really over-consume troop safety, or if we just like to claim we do.

Health is a very mundane danger, though.

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1. Life in the USA would be more boring if we got rid of such things and thought they have not in Scandinavia, they may be replaced by something worse. BTW I had some friends from Finnland and said that Finnland was very boring.2. Also people can opt out of this stuff and save a bundle. Nortin Hadler's book "The last Well person" by Nortin Hadler shows one what healthcare to opt out of save big on healthcare.

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We may overconsume on airline safety, troop safety -in general safety from vivid rather than mundane dangers.

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Robin may have the causation backwards: socialization of a thing might come from lack of enthusiasm for it. If most residents of a country are apathetic towards religion, who cares what the national religion is? If most people don't like to spend a lot of money on health care, who cares about government rationing of health services?

Robin really hasn't convinced me that our over-consumption of health care is irrational. Given the large information asymmetries in the market, isn't it safer to over-consumer than under-consume? Given that most health care is subsidized by the government or employer-provided insurance, isn't over-consuming a safe strategy? The consumer is rarely paying all the costs, after all.

Dan, I think you've got it backwards. Private resource consumption does impose costs on others also wanting to consume, but the payer (the insurer in the case of health care) pays those costs, so there is no externality. "Abusing" (I put that word in quotes because most people are perfectly happy to convince themselves they aren't over-consuming a common good) public services is generally an externality because the cost of being stigmatized an abuser (if that even happens) is generally less than what ones gains by abusing. A better barrier to over-consumption is probably both stigmas and private costs. Of course there are a lot more things going on in health care that influence the market.

Besides, the problem is the rising costs of health care, not necessarily over-consumption. We over-consume junk food, but it doesn't get more expensive, Economics of scale generally means over-consuming something makes the unit cost lower, not higher.

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Clever argument. But is it true that private health services have the same appeal as private knowledge?

People have always been suspicious and jealous of secret elite societies, not just religious ones. Consider Skull & Bones, Free Masons, Knights Templar, &c.

But I can't think of any comparable suspicion of how people spend money on medicine. Most would say that's a quite sensible way to spend disposable income, no?

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We have to be honest here. As the government has tossed cash at various education programs, such as creating the Dept. of Education, No Child Left Behind, etc. etc., the national US graduation rate has not improved very much at all. The issue is of course hard to discern since everybody's fudging.

In the Carter years, the national average rate (http://www.census.gov/popul... seems to have been about 65%? (the report jacks up figures by counting people who get a GED later, which is clearly cheating); (http://www.manhattan-instit... in 1998, 71%; No Child Left Behind was passed in 2001 & signed I think in 2002 the latest figures I can find are from (http://www.higheredinfo.org... 2006 citing a 68% national average rate. (I would have made those clickable links, since actual evidence improves a discussion, but typepad seems to be no longer accepting comments that contain links. typepad so completely sux!!!!)

So maybe for a while tossing money at poor Southern public schools via the creation of the Dep't of Education worked, but not much since then appears to have done diddly.

Robin' suggesting that the more the government does, the less the public consumes. This may indeed apply to k-12 education - the more the government tosses at it, the less the public graduates? No Child Left Behind may have lowered the gradation rate?

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The approach Mankiw seems to favor to reduce prevalence of economically wasteful, crankish behavior is consumption/luxury taxing (SUV driving could be considered crankish behavior too).

Although it occurs to me that it might be politically easier to have government provide popular crankish goods than to have it tax them.

Perhaps consumption taxing would work if we focused on the small enough subset of the crankish waste that could garner sufficient public acquiesence. For example, consumption taxing private tuition and tutoring for families in the top x% of wealth and/or income. (2%? 5%?) Consumption taxing private physician usage to the same degree, also perhaps with means testing.

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Come to think - what would get rid of palm-reading even faster than government bureaucracy would be (the pretense of) scientific acceptance, but with complicated computer programs and calculus needed to do palm-reading the "professional" way.

That kind of thing gets automated-- and astrologers are quite happy to use computer programs.

I don't know if there's a demand for horoscopes done by hand.

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soulless automaton:Along similar lines, how about government-rationed booze for kids starting in high school? Maybe even something reasonably dull and cultured-seeming, like required wine-tasting classes. Anyone think that might actually reduce the frequency of underage drinking outside of said required settings?

I don't have a reference at hand, but it's been my understanding that parents who give their teens reasonable amounts of alcohol together with, say, family meals, tend to end up with kids who use alcohol responsibly. Which should be a no-brainer, once you think about it...

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If people continue to demand more and more education, but care less and less about the content of that education, is their enthusiasm meaningful?

Demanding universal pre-K while undermining the grade signals (through grade inflation) is absurd. People care more about the signals -- both "I care about kids; we need more school" and "My kid is getting As" -- than they do about the amount of actual learning that occurs.

I think we'd find it important to have the palmreaders around if they were part of the government -- we just wouldn't care what they said.

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"All I ask for is my own office, title and a couple hundred grand per year."

- haha! I love it when people have a healthy sense of self-depreciating humor. You almost sounded... British there

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Almost certainly, but there isn't a whole lot of room for growth in k-12. Besides, isn't the theory that government provision should reduce the enthusiasm for the product. In this case, the government provides 12 full years and a substantial portion of higher education and yet we continue to demand more and more.

I love Robin's attempts at synthesizing, but I'm not sure you can predict that memeplexes with such different cultural niches will react similarly.

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Has expenditure per-pupil on higher education increased faster than on K-12?

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