Jonathan Portes and Others on the Mystery of Why Americans are So Unhealthy

In my post “The OECD Compares Health Care Systems” earlier today, I posed this question:

To what extent is the bad performance of the U.S. in life expectancy really a failure of Medicaid—the government medical program for the poor? If we did Medicaid right, while keeping the rest of the system the same as it was before the Affordable Care Act (Obamacare), could we dramatically reduce mortality while at most modestly increasing Medicaid expenditures?

Jonathan Portes answered “probably no” by email, saying “this paper and predecessors is the best comparison of health outcomes (not just mortality, but quite a few more which may be more directly related to health system quality) between US and UK”:

James Banks, Alastair Muriel and Jim Smith: “Disease Prevalence, Disease Incidence and Mortality in the United States and in England." 

I know Jim Smith from a joint University of Michigan-RAND project on "Internet Interviewing” that we are both involved in (the origin of Arie Kapteyn’s amazing American Life Panel), and have the highest respect for him. Jonathan zeroes in on this description that James Banks, Alastair Muriel and Jim Smith give of their previous work:

In a recent widely cited paper, we compared disease prevalence among middle age adults 55-64 years old in England and in the United States (Banks et al. 2006). Based on self-reported prevalence of seven important illnesses (diabetes, heart attack, hypertension, heart disease, cancer, diseases of the lung, and stroke), Americans were much less healthy than their English counterparts, differences that were large along all points of the socioeconomic status distribution. Moreover, using biological markers of disease, we found similar health disparities between Americans and the English, suggesting that these large health differences are not simply a result of differential reporting of illness in the two countries. They also exist with equal force among both men and women (Banks et al.2009). Since we purposely excluded minorities (African-Americans and Latinos in American and immigrants in England), these differences were not solely due to American health issues in the African-American or Latino populations or the growing immigrant population in England. Finally, these disparities in prevalence of chronic illness were not the consequence of differences between the two countries in conventional risk factors such as smoking, obesity, and drinking. Health disparities were essentially unchanged when we controlled for different levels of these risk factors in America and in England.

Jonathan summarizes this by saying

The key point here is “Americans were much less healthy than their English counterparts, differences that were large along all points of the socioeconomic status distribution.” I.e., it’s not just about the poor. Equally, it’s certainly not just about the health system either–public health more generally, income distribution, the rest of the welfare state, etc, all probably play a role.

James Banks, Alastair Muriel and Jim Smith emphasize that the lower health in America applies across the board, for both the high and low of society. But the differences between different socieconomic groups in America are remarkable too. Jim House, my colleague in the Survey Research Center at the University of Michigan told me this fact: in the United States, the gap between the health of those who have college degrees and those who don’t has been growing dramatically. In particular, in recent years it has become apparent that those with college degrees tend to live a long time and then have only a short period of bad health in the period right before death–a pattern significantly less common for those without college degrees. Here is one of his academic papers backing up that claim.

The OECD Compares Health Care Systems →

In response to his Twitter comments related to my post “Miles Kimball and Noah Smith on Balancing the Budget in the Long Run”–which inevitably focused on health care, since that will be the biggest ticket item in the government budget in the future–I begged Jonathan Portes to point me to something relatively brief that I could read to educate myself about the variety of different health care systems in Europe and other advanced countries. He sent me a link to this user-friendly article by the OECD:

Health Care Systems: Getting More Value of Money.

Pay particular attention to the diagram at the bottom of page 7, which lays out the basic varieties of health care systems. Also, though I have heard this fact before, the way in which the U.S. falls below the norm in ability to (on average) transform health care spending into life expectancy in the graph on page 4 is striking.

The question I would like to pose is this:

To what extent is the bad performance of the U.S. in life expectancy really a failure of Medicaid–the government medical program for the poor? If we did Medicaid right, while keeping the rest of the system the same as it was before the Affordable Care Act (Obamacare), could we dramatically reduce mortality while at most modestly increasing Medicaid expenditures?

Note: The OECD or “Organization for Economic Co-operation and Development" is highly respected among economists. It is more or less an organization of the richer countries in the world. 

Update: After I announced this post by tweet, I was tweeted this link to a Commonwealth Fund brief:

Explaining High Health Care Spending in the United States: An International Comparison of Supply, Utilization, Prices, and Quality.

Victor Fuchs and Zeke Emanuel on Health Care Reform

Alan Goldhammer’s (pen name Orange14) comment on my post “Miles Kimball and Noah Smith Discuss Balancing the Budget in the Long Run” is important enough that I am reprinting it here. Appropriately, Noah and I, and the many others who joined the Twitter discussion had focused on health care as the key issue for long-run budget balance. So Alan’s comment is about health care policy:

Interesting exchange but the two of you seem to not know that this has already been proposed for the most part by Victor Fuchs and Zeke Emanuel in the New England Journal of Medicine back in 2005.  Emanuel later extended the proposal to a book, “Healthcare Guaranteed: A Simple, Secure Solution for America.”  It basically does what you want, establishes a global budget for all health care that is paid for by a VAT set by Congress.  Everyone (including those on Medicare and Medicaid) get a voucher to buy an insurance policy to cover their health care.  After market insurance would be available for those who want more than the basic package (the same as is the case with Medigap policies today).

I was involved in this debate going back to 1990 and have tracked almost every proposal that has come along.  This one always made the most sense to me for a variety of reasons:  1) everyone is insured, 2) employers are off the hook and do not have to cover employees which means a better balance sheet, 3) the Medicare and Medicaid problems are solved, 4) we don’t automatically conclude that private sector delivery is bad, and 5) a global budget is established for all of health care which is responsive to the public (through Congress).

In addition, a portion of the VAT is set aside for technology assessment research to determine what works and what doesn’t so that paid for procedures/products are assessed.

Of course the only problem is getting this thing passed by Congress and signed by the President.  No small hurdle there.  The two of you should read the book.  Unfortunately, the NEJM article is still gated.

Alan also sent me the following link by email: 

“Solved!” the Washington Monthly Article by Ezekiel Emanuel and Victor Fuchs on Universal Health Care Vouchers.

Miles Kimball and Noah Smith on Job Creation →

This short Twitter discussion with Noah about “job creation” came out of his reading of “Rich People Do Create Jobs: 10 Tweets” In our discussion, we identified 4 senses in which rich people or entrepreneurs can create jobs (that is, increase labor demand) in companies they fund or lead. In this discussion, I was thinking of labor demand warranted by the extra output the firm will be able to produce if it has another hour of a worker’s effort. Economists call that extra output from another work-hour the marginal product of labor.

  1. Putting in time and effort to organize the firm’s activities in a way that raises the marginal product of a worker.
  2. Taking risks that could turn out badly for the entrepreneur or rich person, but could also turn out well and then have the potential to raise the marginal product of a worker.
  3. Providing funding from their savings that makes machines, factories, training, brand-awareness, or some other form of capital for the firm possible–all of which raise the marginal product of labor.

In addition, members of the government who make wise decisions about economic policy can be said to create jobs.  

In our discussion, we talk about three possible ways an entrepreneur or rich person might approach risk and uncertainty:

  1. In a fully rational way, which I call “Bayesian”.
  2. In a way that is especially averse to uncertain situations where the odds are hard to know. This is called “ambiguity aversion” or aversion to “Knightian uncertainty.” Many economic theorists (both abstract theorists and applied theorists) are interested in ambiguity aversion these days.
  3. In an overoptimistic or overconfident way.

Noah makes what I think is an unwarranted leap that the combination of ambiguity aversion and overconfidence is similar in its effects to being a rational and sensible Bayesian with no ambiguity aversion. Or at least that is how I interpret his word “exactly.”

There is one technical error in our discussion. When there is too much capital, it is possible that more capital could be a bad thing overall, since keeping the capital stock up in the face of depreciation costs more than what the capital produces (the gross marginal product of the capital). But even in that situation, extra capital normally raises the value of having extra labor. The extra capital is a bad thing, but less of a bad thing if there is more labor, so the extra capital raises labor demand. 

Update: Isomorphismes tweeted a link to this wonderful article about the principle that it is the consumption of the rich we should worry about, not their income or wealth:

Tyler Cowen on My Little Brother Jordan's Wisdom →

Tyler Cowen likes my younger brother Jordan Andrew Kimball’s plan to have free clinics for all we can afford as a nation and have people pay for the rest themselves. I talk about this plan in “Miles Kimball and Noah Smith on Balancing the Budget in the Long Run.” In one of the storified tweets, I write: 

I have to credit my brother Jordan Kimball, a radiologist, for the proposal of free clinics for all we can afford, no more.

I hope I have defended and fleshed out my brother Jordan’s plan in a way he would approve.

Note: My wife Gail and I named our son Jordan Matthew Kimball (who is now an undergraduate at Ohio State University studying economics) after my brother Jordan and her father Matthew Cozzens.

Isomorphismes on Enclosures →

Click on the title or here for a fascinating post by isomorphismes about the isolation caused by the way we conceive of real estate in our culture. There are great pictures and a BBC audio link, too.

I had no idea that so recently people roamed about each other’s land, no fences dividing the farms and folds.

The modern structure of towns, like so many things, is an outcome of economic structure.

  • When shepherds no longer roamed freely through the hills
  • and it became efficient for homes to be built in a rotary array around some kind of centre,
  • then pubs (public houses = free houses) became the meeting place

This is one of the most influential things I’ve heard, period. Think about how much longer you have to walk and how much lonelier life became once you don’t cut across another person’s land.

My pessimistic image of the culture that I live in is

  • city people all in their separate flats, with their separate computers, or separate televisions, on separate couches, alone in the space they’ve paid for with the career they fought to dominate
  • going out to a restaurant, pub, or coffee shop to experience the unexpected bumpings into people
  • so everything costs money. It costs money to have friends, costs money to hang out, costs money to flirt, costs money to meet people, costs money to put yourself in a place where people will happen to encounter you–unless you do it over the internet–and then people wonder why nobody makes friends after college…
  • suburban people the same, except also having their own pools instead of sharing a few community pools
  • having their own medium-sized lawns – big enough to keep the neighbours from peeping in the window, or seeing you on the porch and say hello – instead of sharing a large park cutting all the medium lawns down to small lawns (not that they individually choose this – the decision is made by real estate developers)
  • country people even more isolated because land tracts are so huge
  • and nobody, but nobody, knows their neighbours.

Miles Kimball and Noah Smith on Balancing the Budget in the Long Run →

Not surprisingly, a lot of our discussion ends up revolving around health care.

Update: Matt Yglesias, Stephen Bronars, Matt Stambaugh, Tyler Cowen, Modeled Behavior and Jason Becker joined the part of the debate about health care, and I flagged John Cochrane’s excellent suggestions about health insurance. Noah and I also flagged articles about Japan’s current situation, which gives a flavor of the future budget issues the U.S. faces. 

The Matrix and Other Worlds: The Videos

In my post “Teleotheism and the Purpose of Life,” I wrote

There are at least two ways in which the standard scientific worldview is consistent with the possibility of a superbeing.These possibilities are both common themes in hard science fiction.Hard science fiction is science fiction that focuses on things that are genuinely possible given what science we know.One of these hard science fiction themes is reminiscent of traditional Christian theology, while the other is reminiscent of Mormon theology.

Traditional Christian theology, put into a hard science fiction straightjacket, is like the idea that we are all software programs inside a superbeing’s computer.There is no way to know this is not true.If it is true, miracles would just be a special case in the programming.The normal laws of nature could be as simple and regular as they are simply because that was easier than programming more complex laws for the default case.

Mormon theology, put into a hard science fiction straightjacket, is reminiscent of the idea that we are watched over by benevolent aliens from an advanced civilization.Not only is this plausible, it is even possible to argue that it is likely.There are a lot of stars in the Galaxy, but even at a fraction of the speed of light, it would take only a small fraction of the time since the Big Bang to get from one end of the Galaxy to another.If evolution often favors intelligence, why couldn’t intelligent life arise several times in our galaxy?If any intelligent life has arisen before us, chances are it arose many, many millions of years before us, simply because it has been billions of years since the Big Bang.So it is not a big stretch to have aliens from an advanced civilization reach Earth.The big issue would be Fermi’s paradox:“Where are they?”“If they are here, why they are hiding themselves from us?”and whether they are benevolent or not.If they are here, they don’t seem to have destroyed us, which is something.

To me these are important religious questions, but science fiction is not always recognized for the serious theological speculation that it often is.

I found some excellent videos on these speculations, which have some great graphics. The first is about the possibility that we are inside God’s computer. The other three are about the possibility of intelligent aliens. 

  1. Are We Just Simulations? Through the Wormhole: Episode 1
  2. Are We Alone? Through the Wormhole: Episode 6
  3. A Solution to the Fermi Paradox
  4. Alien Planet: Full Documentary

(wikipedia’s definition of the Fermi paradox is: "The Fermi paradox (or Fermi’s paradox) is the apparent contradiction between high estimates of the probability of the existence of extraterrestrial civilization and humanity’s lack of contact with, or evidence for, such civilizations.[1]“)

The Paul Ryan Tweets →

In honor of Paul Ryan being chosen as Mitt Romney’s running mate–a big event no matter what your political leanings–here is a record of a Twitter discussion I had about Paul on July 27, some handicapping in the last few days of whether he would be Mitt’s pick, and my selection from the Twitter traffic about Paul today. The other participants are Noah Smith, Adam Sulewski, Matt Bruenig, Matt O'Brien, Mike Konczal, Casey Thormahlen, and indirectly, Howard Gleckman, Ezra Klein, Andrew Levine, Mike Sax, Jonathan Bernstein, Matt Williams, John Podhoretz, Betsey Stevenson, Josiah Neeley, Matt Stambaugh, Evan Soltas and Brad DeLong among others.

Don’t miss the discussions of long-run fiscal policy and health care. The video of Paul begging Congress to pass the bank bailout (TARP) that I link to at the end shows that he met an important test of seriousness. The bank bailouts are not popular now, but they were necessary in order to avoid a much worse economic outcome than the scathing economic outcome that we have actually had.   

In my mini-bio at the sidebar, it says

Politically, Miles is an independent who grew up in an apolitical family. He holds many strong opinions—open to revision in response to cogent arguments—that do not line up neatly with either the Republican or Democratic Party. 

In these Twitter discussions, you will see me considering and responding to arguments and coming out of the discussions in a different place than where I entered them–on several dimensions.   

To untangle the different discussion threads, I had to depart from chronological order.

Rich People Do Create Jobs: 10 Tweets →

This is my answer to a TED talk by Nick Hanauer, “Rich people don’t create jobs.” In the context of his TED talk, “rich people” means “entrepreneurs.” You can see my 10 tweets here, as well as by clicking on the title of this post. Let me explain a little background on a couple of these tweets.

  1. It is when rich people consume that they use resources for themselves. If they save and invest their money, they are influencing how resources are deployed, but not using those resources up. If they give their money away, then the choice is in the hands of those they give the money to. If it is to their children, let’s hope their children also save and invest or give most of the money away so that they don’t use too many resources on themselves.
  2. When I say that the efforts of entrepreneurs are complementary with those of other workers, I mean that extra effort by workers in a company produces more additional output the harder the entrepreneur is working to organize things.  
  3. In the short run, higher labor demand leads to more employment, but in the long run, higher labor demand leads mostly to higher wages, not to people working more. This is because, even if people are offered more jobs, there is a limit to how much they want to work. But almost all political rhetoric about labor demand is discussed in terms of “jobs." 
  4. One of my biggest themes on this blog is that despite the ways in which current policy is flailing around, that getting enough aggregate demand is not, in principle a hard problem. The hard thing is to foster the combination of more long-run growth and a fairer long-run distribution of the resources people actually use for themselves by consuming them.
  5. Although having a large middle class providing a market for new goods probably is quite a good thing for technological progress, I think that trying to get a larger middle class by redistributing from the rich to the middle-class would backfire. That’s not the way to do it. What is a good way to bolster the middle class? How about breaking the public quasi-monopoly on education with vouchers and charter schools? Or failing that, how about doing what I propose in "Magic Ingredient 1: More K-12 School.” Also, let me repeat here my statement about rich, poor and middle-class, from my post “Rich, Poor and Middle Class”:

I am deeply concerned about the poor, because they are truly suffering, even with what safety net exists. Helping them is one of our highest ethical obligations. I am deeply concerned about the honest rich—not so much for themselves, though their welfare counts too—but because they provide goods and services that make our lives better, because they provide jobs, because they help ensure that we can get good returns for our retirement saving, and because we already depend on them so much for tax revenue. But for the middle-class, who count heavily because they make up the bulk of our society, I have a stern message. We are paying too high a price when we tax the middle class in order to give benefits to the middle-class—and taxing the rich to give benefits to the middle-class would only make things worse. The primary job of the government in relation to the middle-class has to be to help them help themselves, through education, through loans, through libertarian paternalism, and by stopping the dishonest rich from preying on the middle-class through deceit and chicanery. 

6. Successful entrepreneurs create jobs in their own firms, but also typically destroy jobs in competing firms. That is part of how economic progress happens. We can block this competitive creation of new jobs and destruction of old jobs only at the cost of long-run stagnation. I doubt Nick Hanauer meant to argue for blocking progress in that way.  

7. Outsourcing and offshoring also create jobs. People in other states or other countries getting jobs counts, too. They are human beings, just like us.

"Wallace Neutrality" on wikipedia

Link to the “Wallace Neutrality” article on wikipedia

Two months ago, I proposed a public service project for the readers of this blog, in this post:

A Proposal for the supplysideliberal Community’s First Public Service Project: a wikipedia Entry on “Wallace Neutrality”

Thanks to Fudong Zhang, the wikipedia article on “Wallace Neutrality” is up on wikipedia!

I hope that many of you will try your hand at editing it further. For example, I think it is true that in some models with Wallace neutrality, when the nominal interest rate is already zero, the only way to stimulate the economy by monetary policy is to make people expect higher output gaps in the future, after the economy is no longer at the zero lower bound, as discussed in my post “Should the Fed Promise to Do the Wrong Thing in the Future to Have the Right Effect Now?” If it were possible to pin this point down better theoretically and explain exactly how Wallace neutrality figures into the result, that would be a great addition to the wikipedia article.

For the theoretically inclined, a good place to start in thinking about the “Should the Fed Promise to Do the Wrong Thing in the Future to Have the Right Effect Now?” dilemma is Ivan Werning’s continuous-time model of monetary and fiscal policy at the Zero Lower Bound when Wallace neutrality holds: “Managing a Liquidity Trap: Monetary and Fiscal Policy.” More generally, references to ways in which Wallace neutrality has explicitly or implicitly entered into real-world discussions of monetary policy would be of interest in the article.  

I very much appreciate Fudong’s efforts and am glad to see this project on its way. Let’s not stop here.

The True Story of How Economics Got Its Nickname "The Dismal Science" →

Comments to my post “Dismal Science Humor: 8/3/12” corrected me in my claim that the nickname “the dismal science” was a response to Malthus. It turns out that only the word “dismal” was a response to Malthus.  

David Levy and Sandra Peart tell a more interesting story about Thomas Carlyle’s motives in coining the phrase “the dismal science” in “The True Story of the Dismal Science. Part I: Economics, Religion and Race in the 19th Century.” Carlyle called economics “the dismal science” in response to John Stuart Mill’s arguments against slavery. So the true history of the phrase “the dismal science” means that all economists can answer to the nickname “dismal scientist” with pride.  

Should Everyone Spend Less than He or She Earns?

Question: exjunior asked

I’ve always thought Kant’s categorical imperative was a good guide for ethical behavior. But then I pose the question, should I spend less than I earn? Following Kant, I consider what would happen if everybody spent less than they earn all the time. Insofar as I understand modern macroeconomic theory, the result would be a depression. But spending less than you earn is manifestly a good thing. Has economics proven Kant was wrong?

Answer: I disagree with your statement that “spending less than you earn is manifestly a good thing.” In order to save for retirement, spending less than you earn is a good idea when you are young. But it is totally appropriate for retirees to be spending more than they are currently earning. In the long run, looking past business cycles, retirees spending more than what they earn during their retirement years (as they should) balances out for younger people spending less than what they earn (as they should).  

Fed Transparency and Obscurantism

Question: docstocks asked

As I’m sure you know, the House just passed the ‘Audit the FED’ bill. Putting aside the merits of this bill, which I’m sure is just an attempt by Ron Paul to constrain the FED, what are the reasonable arguments for and against more transparency at the FED?

Answer: In general, I think that more transparency is good, on the grounds that it helps generate discussion of policy that can gradually improve policy. You will generally see me arguing for more transparency. However, in my post “Going Negative: The Virtual Fed Funds Rate Target,” I argued that sometimes, in order to avoid headlines that would generate political heat on the Fed and so possibly compromise Fed independence, it is a good idea for the Fed to provide enough information for people to figure out what it is going to do, but not connect all the dots to say that it will buy yeay many gigadollars or teradollars worth of certain assets. In other words, the Fed should disclose things in a way that makes it very transparent for sophisticated Fed watchers. But in some cases it may be OK for the Fed to say things in a way that is a little obscure for the general public, which have to be explained to them by the journalists covering the Fed. Even for the general public, it can be argued that this is in service of the maximum level of understanding, since the initial impression that the issues are hard to understand and require reading a whole article rather than just a headline is accurate.

In the case of Fed actions during the financial crisis, which involved bailouts, in the end, I think the Fed has to report everything it has done, but if I were at the Fed in charge of that reporting, I would try to do it in a way that would make the most boring headlines possible given the inflammatory content.  

Despite my support for occasional obscurantism to keep political inflammatory dollar figures out of headlines so that people have to actually read the newspaper article to see them, I think the Fed in general should do everything reasonably within its power to help the general public understand monetary policy. On that score, I strongly favor Bernanke’s approach toward explaining monetary policy over Greenspan’s approach.