Two Papers of Interest
Two papers in the current issue of Health Economics look interesting to me. I may not have time to read them but others might wish to. They’re listed below with links and abstracts.
The first addresses the question of whether the fact that individuals switch health plans results in lower use of preventative services. Since provision of preventative services is a current investment for a future return, high turnover offers an opportunity for an insurer to benefit from the investments of others and to dodge the consequences of its own under-investment.
The second paper below documents the variation in value of a quality adjusted life year (QALY) across countries. Since figures are not reported in the same currency they are hard to compare. But the authors also estimated the discount rate of QALY value across countries. The QALY discount rate in Japan is almost twice that in the U.S., for example.
Many preventive healthcare procedures are widely recognized as cost-effective but have relatively low utilization rates in the US. Because preventive care is a present-period investment with a future-period expected financial return, enrollee turnover among private insurers lowers the expected return of this investment. In this paper, I present a simple theoretical model to illustrate the suboptimal provision of preventive healthcare that results from insurers ‘free riding’ off of the provision from others. I also provide an empirical test of this hypothesis using data from the Community Tracking Study’s Household Survey. I use lagged market-level measures of employment-induced insurer turnover to identify variation in insurers’ expectations and test for the effect of turnover on several different measures of medical utilization. As expected, I find that turnover has a significantly negative effect on the utilization of preventive services and has no effect on the utilization of acute services used as a control.
Takeru Shiroiwa, et al., International survey on willingness-to-pay (WTP) for one additional QALY gained: what is the threshold of cost effectiveness?
Although the threshold of cost effectiveness of medical interventions is thought to be £20 000-£30 000 in the UK, and $50 000-$100 000 in the US, it is well known that these values are unjustified, due to lack of explicit scientific evidence. We measured willingness-to-pay (WTP) for one additional quality-adjusted life-year gained to determine the threshold of the incremental cost-effectiveness ratio. Our study used the Internet to compare WTP for the additional year of survival in a perfect status of health in Japan, the Republic of Korea (ROK), Taiwan, Australia, the UK, and the US. The research utilized a double-bound dichotomous choice, and analysis by the nonparametric Turnbull method. WTP values were JPY 5 million (Japan), KWN 68 million (ROK), NT$ 2.1 million (Taiwan), £23 000 (UK), AU$ 64 000 (Australia), and US$ 62 000 (US). The discount rates of outcome were estimated at 6.8% (Japan), 3.7% (ROK), 1.6% (Taiwan), 2.8% (UK), 1.9% (Australia), and 3.2% (US). Based on the current study, we suggest new classification of cost-effectiveness plane and methodology for decision making.
Reviewing Academic Literature: Service, Lament, and Offer
Another dump of new NBER papers just came through. There are several I’d like to read and possibly summarize for this blog. As a service, I’m including the abstracts for those below. My lament is that I may not get to them all. There is too much to read and not enough time. And this is just a small slice of the new literature from all sources.
Hence, this offer: if anyone out there reads any of these and wants to send a guest post summary I’ll consider posting. I can’t promise publication in advance or else that blows any chance at quality control. FYI, I’ve printed the last one listed, on empirical industrial organization, because it is most relevant to my work. If I summarize any of these for this blog that one will be first.
Economics of estate taxation: a brief review of theory and evidence use, Wojciech Kopczuk, NBER Working Paper No. 15741. This paper provides a non-technical overview of the economic arguments related to the desirability of transfer taxation and a summary of empirical evidence surrounding these issues. Understanding optimal transfer taxation throughout the distribution requires understanding the nature of a bequest motive, a topic on which there is little consensus. However, I argue that progress still can be made on the question of desirability and optimal level of estate taxation at the top of the distribution, because interpersonal externalities implied by the presence of bequest motive are irrelevant from the welfare point of view when the focus is on the wealthy. I also examine the role of negative externalities from wealth concentration in providing justification for considering this type of taxation.
Students Choosing Colleges: Understanding the Matriculation Decision at a Highly Selective Private Institution, Peter Nurnberg, Morton Schapiro, David Zimmerman, NBER Working Paper No. 15772. The college choice process can be reduced to three questions: 1) Where does a student apply? 2) Which schools accept the students? 3) Which offer of admission does the student accept? This paper addresses question three. Specifically, we offer an econometric analysis of the matriculation decisions made by students accepted to Williams College, one of the nation’s most highly selective colleges and universities. We use data for the Williams classes of 2008 through 2012 to estimate a yield model. We find that—conditional on the student applying to and being accepted by Williams—applicant quality as measured by standardized tests, high school GPA and the like, the net price a particular student faces (the sticker price minus institutional financial aid), the applicant’s race and geographic origin, plus the student’s artistic, athletic and academic interests, are strong predictors of whether or not the student will matriculate.
Foreclosures, Enforcement, and Collections under the Federal Mortgage Modification Guidelines, Casey B. Mulligan, NBER Working Paper No. 15777. Federal mortgage modification initiatives, targeting millions of borrowers, are intended to prevent foreclosures of underwater home mortgages. Those initiatives discourage principal reductions in favor of interest reductions, despite the possibility that the former would be a more durable foreclosure prevention tool. The programs also impose marginal income tax rates substantially in excess of 100 percent. Using the framework of optimal income taxation, this paper shows how alternative means-tested modification rules would simultaneously improve collections, efficiency, the number of foreclosures, and their total cost. As a result, lenders have an incentive to foreclose on borrowers deemed modification eligible by the federal programs.
“Unfunded Liabilities” and Uncertain Fiscal Financing, Troy Davig, Eric M. Leeper, Todd B. Walker, NBER Working Paper No. 15782. We develop a rational expectations framework to study the consequences of alternative means to resolve the “unfunded liabilities” problem—unsustainable exponential growth in federal Social Security, Medicare, and Medicaid spending with no plan to finance it. Resolution requires specifying a probability distribution for how and when monetary and fiscal policies will change as the economy evolves through the 21st century. Beliefs based on that distribution determine the existence of and the nature of equilibrium. We consider policies that in expectation combine reaching a fiscal limit, some distorting taxation, modest inflation, and some reneging on the government’s promised transfers. In the equilibrium, inflation-targeting monetary policy cannot successfully anchor expected inflation. Expectational effects are always present, but need not have large impacts on inflation and interest rates in the short and medium runs.
Empirical Industrial Organization: A Progress Report, Liran Einav, Jonathan D. Levin, NBER Working Paper No. 15786. The field of Industrial Organization has made dramatic advances over the last few decades in developing empirical methods for analyzing imperfect competition and the organization of markets. We describe the motivation for these developments and some of the successes. We also discuss the relative emphasis that applied work in the field has placed on economic theory relative to statistical research design, and the possibility that a focus on methodological innovation has crowded out applications. We offer some suggestions about how the field may progress in coming years.
WordPress Plug-In Plug: Editorial Calendar
If you’re not a WordPress blogger, this post may not be of much interest to you. In that case, try this one from the archives.
A friend from my Go playing days, Zack Grossbart, is also a skilled programmer and IT project manager. He’s led a team in building a WordPress plug-in called Editorial Calendar that is worthy of praise. In fact, it is the only plug-in I desired before I knew about it.
A problem that I (and Zack) recognized with the standard WordPress blog administration product is that the only way to view a collection of posts (past and future) is in one long list. If one schedules posts far into the future, as I do, a list is a very difficult way to manage them. You can’t quickly see which weeks or months are relatively full or empty. You can’t tell if your posts are on weekends or weekdays. Moving posts to different dates is a pain.
It occurred to me months ago that a standard calendar view would be far better. That’s what one would use if one blogged by pencil and paper, if that made any sense. That’s because it is intuitive. It leverages our natural ability to comprehend and reason spatially. When I learned Zack and company were building just that I was thrilled. Now that I’m using it, I’m very satisfied.
The Editorial Calendar allows one to view posts on a calendar (of course), to drag them from one day to another, to edit posts right from the calendar view, and to click on a date to enter a new post. How sensible! It ought to be in the standard WordPress implementation. Until it is, you can use it as a plug-in.
For more on the Editorial Calendar, visit its page, Zack’s blog entries about it, and watch the following short YouTube video.
Yale’s Psych 123: Food for Thought
We spend a lot of time thinking about food at my house. We read about food. In particular we are fond of Michael Pollan’s work on the subject. So, we’re very aware of the dysfunctions of food culture, economics, politics, and policy, particularly in the U.S. (for thoughtful posts in those areas visit Ezra Klein’s Food Archive).
So it seemed likely I’d enjoy Yale Psych 123, Kelly Brownell’s course on the psychology, biology, and politics of food. And I did. But I recommend starting with Pollan’s books The Botany of Desire, In Defense of Food, and The Omnivore’s Dilemma (I see he now has another book on food I haven’t yet read: Food Rules). They will provide most of the background that Brownell covers in the first half of his course but in a personal, narrative style that I found a little more engaging. With Pollan’s work as background, you can jump to lecture 12 of Psych 123.
I admit I listen to podcats in general and Open Yale Courses (OYC) content in particular for entertainment, not just for information. (All my reviews of OYC offerings are under the Yale tag.) Brownell’s course is packed with information and took a more entertaining turn in the second half in which his passion for his subject comes to the fore. His strong opinions about food policy are evident in later lectures, and a good way to entertain is to take a strong position.
Two parts of the class stood out as particularly interesting to me. The first occurred in the seventh lecture when Brownell described the starvation that occurred during the World War II siege of Leningrad. He read from The Great Starvation Experiment by Todd Tucker, which is worthy of a lengthy quote:
It was November 1941. The people of Leningrad were beginning the hungry winter, the coldest winter ever in the city with a proud history of miserably cold winters. … Hitler formulated an elegant plan, … [a] siege [that] would last 872 days….
As the siege dragged on, the temperatures plummeted to -40 degrees. The people collectively remembered that some wallpaper paste was made from potatoes. Wallpaper was stripped away from the living rooms and parlors of Leningrad, the paste scraped into pots and boiled into soup, a soup that tasted much more like paste then potatoes. Leather too could be boiled into a gelatinous mess that could briefly satisfy the sharpest pangs of hunger.
By 1943 the siege entered its second year, all the animals, wallpaper paste, and leather had been consumed. The people descended into a rare kind of hunger, a hunger that tested even the most fundamental taboos, people began eating corpses. …
By the beginning of 1944 as even corpses and children became scarce there were reports of people cutting off their own body parts and eating them in a desperate attempt to stave off hunger. The Red Army broke through the German lines on January 27, 1944 and the siege was lifted. In all, a million Soviets had starved to death in that city, more then a thousand per day. People were forbidden both officially and unofficially, from ever speaking of the cannibalism that took place during the siege. The Soviets had learned, to a frightening extent, how much the availability of food allows civilization to occur.
That’s powerful stuff. Much less powerful but just as interesting is the guest lecture by Stephen Teret (number 19), an expert in the application of litigation as a tool for the promotion of public health. He’s a very entertaining lecturer and tells some humorous stories. Listen to his lecture alone for a bit of edu-fun.
I also like one of Brownell’s final assignments. He asks students to write and try to publish an op-ed on a food-related issue. As someone who believes in the power of the 650-word blog post/op-ed, I think this is an excellent assignment. If you can’t make the case for one idea in a piece of that length you’ll have a hard time getting anyone to pay attention to you. (I write this with awareness that this post is approaching 900 words. We can’t win them all.) If any of Brownell’s future students wish to publish their op-ed on this blog, send it my way and I’ll consider it.
Throughout the class, but particularly in the final lectures, there is much made about the parallels in the evolution of culture and policy between food/obesity and other threats to public health like guns, alcohol, drugs, and cigarettes. Brownell and other champions for better nutrition through policy view victories in other arenas as models for what might one day be achieved for food.
Perhaps. But food is fundamentally different from those other threats. Everyone must eat. Not everyone must use a gun, drink alcohol, use drugs, or smoke. Moreover, food choices are intricately bound with socio-economic and cultural forces in ways that differ from some of the other threats mentioned. For these reasons, changing the culture and policy of food will be more challenging than that of, say, cigarettes. I’m glad folks like Brownell and Pollan are trying, but I think victory is a long way off. A good first step is for more people to pay attention to their work, including you.
Bogleheads on Retirement Planning
By middle age or thereabouts, it is a good idea to know a bit about each of several issues relevant to retirement planning other than investing. The relevant topics include estate planning, annuities, social security, health insurance, among others. Knowing a bit about each will help one know which applies to one’s situation and when to learn more. Removing the unknown unknowns is a good idea.
Enter The Bogleheads’ Guide to Retirement Planning. In 20 chapters–each roughly 16 pages–it covers all the essential topics relevant to retirement planning, not just investing. Therefore, before you or your spouse is ten years from retirement The Bogleheads’ Guide to Retirement Planning is recommended reading (assuming you’ve already had a sound retirement investment plan for decades).
The Oblivious Investor reviewed The Bogleheads’ Guide to Retirement Planning last October and I agree with his broad sentiments:
I’ve read books that are intended to be “all you need to know about personal finance.” And I’ve read books that are intended to be “all you need to know about investing.” But The Bogleheads’ Guide to Retirement Planning is the first book I’ve read that’s “all you need to know about planning for retirement.” Note the distinction: This book is not about saving/investing for retirement. It’s about planning for retirement (and everything that’s a part of such planning). The best part about the book, in my opinion, is the breadth of topics covered.
Of course, each topic is treated rather briefly so one would need to turn to other sources for details. (Indeed, it doesn’t suffice as a guide to investing, but the other Boglehead book, The Bogleheads’ Guide to Investing, nicely fills the role.) Each chpater of The Bogleheads’ Guide to Retirement Planning ends with a list of further reading so it serves as a guide to the broader literature as well.
It was a particularly fun read for me because I know (in a sense) some of the authors through their participation on the Bogleheads Investment Forum. A few of them have a had important impacts on my own investment planning, notably tfb (of The Finance Buff) and EmergDoc (Jim Dahle). Another nice touch is that the book includes a chapter on dealing with financial disasters. Since a good portion of the population will face one (divorce, bankruptcy, and the like) it makes sense to be armed with a bit of information about what to do, if only to have a good idea of where to turn for help.
I did find it rather amusing that most chapters include the boilerplate advice to consult a paid professional. That’s odd coming from the Bogleheads who are notorious do-it-yourself-ers. Many readers and most full-blown Bogleheads will not need a professional to assist with some areas, like investment planning or taxation issues. All they need are some good books and a good place to find the details, like the Bogleheads Investment Forum. Seeking professional advice makes good sense for almost everyone in some areas for which legal precision is required, like estate planning.
In conclusion, my recommendation is that young investors read The Bogleheads’ Guide to Investing. That’s all one needs for retirement investment planning, though there are other good books too (many reviewed by The Finance Buff). As retirement approaches, or earlier if you’re just interested, complete your base of knowledge with The Bogleheads’ Guide to Retirement Planning.
The Atlantic’s Contrarian Problem
I’ve subscribed to The Atlantic for over 15 years. Some of the best things I’ve read have appeared in that periodical. I’ve learned a lot from it, or so I thought. But the recent article by Megan McArdle on the relationship between insurance and mortality begs the question whether I’ve actually learned anything (related posts).
Because it’s in an area related to my own work, it is clear to me and should be to any health economist or health care researcher that McArdle’s scholarship was not up to snuff. The narrow slice of the literature she cited supported her conclusion but was not representative of the whole, which paints a completely different picture. And from that misleading and narrow slice her absurd conclusion followed–that we should have known more about the insurance-mortality relationship before we considered health reform.
One need only take an expansive look at the literature to reach the established conclusion that insurance improves health and reduces mortality. Michael McWilliams has done that thorough examination, on this blog, in his original published and peer reviewed work, and in a comprehensive literature survey. Stan Dorn has provided another blog-length literature review. McArdle’s falls fall short by comparison.
McArdle’s piece is typical of a subset of articles in The Atlantic, the ones in which a journalist takes a look at a few papers, perhaps talks to a small number of researchers (or maybe not) and then spins a contrarian story. Such pieces have the veneer of legitimacy and seem to have the hallmarks of good scholarship. But in reality they posses neither.
The next time I read such a piece in The Atlantic, can I believe it? If I didn’t know better I’d have believed McArdle’s. Perhaps many readers do or will. That may be a victory for McArdle and The Atlantic, but it is a defeat for truth and honesty.
What’s the point of articles that cherry-pick research to support contrarian conclusions? They may be provocative, but a misleadingly narrow review of a body of research often can be. Being provocative is not necessarily bad, but doing so in a manner that misrepresents a body of work is an insult to science and does readers a disservice. In what way is that useful, unless your goal is to be misinformed and misled (as a reader) or to support otherwise unjustified policy conclusions (as an author)?
I may have been an Atlantic subscriber for a long time, but if they print more pieces like McArdle’s I won’t be one for much longer.
Jon Cohn: Mr. Cool
Johnathan Cohn is a superb source for all things health care policy (and politics). This afternoon’s post is a perfect example of his work. He puts all the confusing sturm und drang over health reform’s near death experience this week in perspective. Given all the conflicting signals, I think he draws the right conclusion that it isn’t dead, just mostly dead. Revival is not impossible, just hard and likely not imminent. If you want a clear explanation in one post of this week’s events in health reform politics, this is it.
But back to Cohn. He distinguishes himself from other bloggers in being a bit more deliberate. You won’t get a half dozen posts from him a day. But when a post comes through it reveals thoughtful reflection on recent events: no snap judgments; nothing sensational or over-spun; just good, solid analysis. He’s the Mr. Cool of the health care blogosphere.
Geek Fun
I’m on a blog break this week and all posts are reruns. The next new post will appear on the 4th of January. This post originally appeared on 1 July 2009. Visit the original post for comments.
Ammon Shea’s most recent book Reading the OED describes his journey through the bible of the English language. In it he catalogs the words he found most “interesting and unusual.” Nice work. But he missed an opportunity to read an even more interesting dictionary, the Jargon File. Called to my attention by an old friend, the Jargon File is “a comprehensive compendium of hacker slang illuminating many aspects of hackish tradition, folklore, and humor.”
One could get lost in the Jargon File for hours; it is chock full of beanie propeller turning fun. Some examples:
- A banana problem is not knowing when or how to stop. It comes from a story about a little girl who said “I know how to spell ‘banana’, but I don’t know when to stop.”
- Barfulous is “something that would make anyone barf, if only for esthetic reasons.”
- A bogon is a unit of bososity. Quantom bogodynamics is the theory of bogon flux, which is measured with a bogometer and attenuated by a bogon filter. Things can become bogotified or rendered useless. For instance, “if you tighten a nut too hard and strip the threads on the bolt, the bolt has become bogotified.”
- Though not in the Jargon File, a bogon’s anti-particle is (or should be) a cluon. But the Jargon File does include an entry for clue-by-four, a “stick with which one whacks an aggressively clueless person.”
- One variant of can’t happen refers to a situation in which something seemingly impossible and illogical nevertheless occurs.
- A grumby is “technical incompetent who impedes the progress of real work.”
- Hanlon’s Razor is “similar to Occam’s Razor, that reads ‘Never attribute to malice that which can be adequately explained by stupidity.’
- Microsloth Windows (or any of {Microshift, Macroshaft, Microsuck} Windows is a “thirty-two bit extension and graphical shell to a sixteen-bit patch to an eight-bit operating system originally coded for a four-bit microprocessor which was written by a two-bit company that can’t stand one bit of competition.”
- A one-banana problem is one so obviously simple that it could be solved by a trained monkey.
- Snarf and barf is essentially hacker (self) plagiarism.
- Sporf! is “the sound of a beverage hitting the monitor and/or keyboard after being forced out … via the nose.”
- Voodoo programming is the faith-based use of code one doesn’t understand in the hopes that it will work anyway. See also wave a dead chicken.
- You are not expected to understand this is said or written about something “too complicated to bother explaining properly.”
I only skimmed the Jargon File glossary quickly to find those gems. I’m sure there is lots of other good stuff. If you find some, let me know in a comment. Since Ammon Shea won’t do it, we’ll have to collectively write “Reading the Jargon File” ourselves.
Nate Silver: The Wonkiest Quant
Deep down, I’m a quant. I only became a wonk later in life. At work, when I’m not writing blog posts, journal articles, or grant proposals I’m running quantitative analysis of data pertaining to health care insurance markets, among other things.
So I really appreciate Nate Silver when he does stuff like this. His quantitative analysis of politically and policy relevant topics reflects a stunning creativity with data. If anybody exploits more data in more ways than he does I’d like to know about it. More astonishing is the speed and methodological rigor with which he does his work. It’s terrific stuff, for which he’s earned a solid reputation.
For all this I declare Nate Silver The Wonkiest Quant. It takes a special love of analysis and empirically-driven knowledge to read his stuff. But if you’re so inclined, be sure to pay attention. He and his colleagues at FiveThirtyEight.com are worthy of it.
Password Solutions
Passwords are a modern headache. If you’re like me you access dozens of systems and websites for which you need a password. There are lots of rules and advice about passwords, like not using real words or your birthday, or using special characters (!@#$%^&*), and not writing them down. If you follow all these rules and still have access to all the systems you use (i.e. haven’t forgotten your passwords) then color me impressed. That’s not easy.
In conversations with a few friends and family members I realized that there are some very good password tricks out there that don’t violate any rules or advice. In fact, they can help you adhere to them, and they can increase security (at least insofar as they can obviate the need to write down passwords, if not in other ways).
Expiring Passwords. Ever had a nice password that you found easy to remember and then been forced to change it because it has expired? Some systems won’t let you reuse an old password or require you to change your password every so often (quarterly or annually are common durations).
Here’s my trick for dealing with that situation. Add a time stamp to the end of your password. So, if your password is “foobar” use “foobar094″ where the “09″ part is the two digit year and the “4″ part is the fourth quarter, or fourth one in that year. To increase security of your password, separate the stub (my term for the “foobar” part) from the date stamp with a special character, as in foobar@094.
I’ve yet to encounter a system that did not permit this type of password recycling. It is an easy way to recall your password since the stub never changes and the date stamp is self-evident. One can argue that this makes your passwords less secure because, while they change, they do so in predictable ways. Maybe so. However you can mix it up by putting the date stamp in the middle or even splitting it, like so: “09foobar4″ or “foo$094$bar”. The last of these may be the strongest. I’m just guessing.
So long as you use a consistent system for the time stamp you should be in compliance with password rules and easily recall your password.
Security Questions. Security questions are those questions systems ask you as a backup way to identify you. “What was your first school?” “What was the name of your first pet?” are two examples. I don’t like security questions that are preset. I prefer ones I can make up myself (some systems allow this). In fact security questions are not that secure since the answers are often in the public domain. That’s especially true if you post details about your life on Facebook or your personal website or elsewhere.
However, you can make those security questions more secure by using them as a secondary password. Instead of answering “What was your first employer?” with the truth (like “Bear Stearns”) you can anwer with a password-like string, such as “ickyboo.” You can use that password-like string for every security question on different sites. You will not have trouble recalling it if it is a meaningful password to you. Meanwhile, nobody is going to guess it if it isn’t a real answer to the question posed. I can’t see how this fails to enhance security.
Do you have any password or security tricks to share? If so, please do so. Do you think I am wrong in suggesting that the above ideas increase security (or at least do not decrease it)? If so, please explain.
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