31.8.09

GOOD QUESTION. Jules Crittenden:
Someone please remind me why some guy’s death means we have to get saddled with something he never managed to sell in life.
Geoff Garin offers one possibility.

Democrats did not get their way on the creation of the Medicare prescription-drug benefit, but on that, too, Kennedy decided that something was better than nothing, even though seniors were required to buy their coverage through private companies and Medicare was prevented from negotiating with the pharmaceutical companies for the best prices.

Kennedy gave Bush a victory rather than sending the Republicans to their Waterloo because he believed the result was more important than short-term politics. If Republicans really want to honor the senator's memory, they should stop using him as an excuse for the failure of health-care reform and instead start living up to his example.

That argument, however, presupposes that a result is desirable for its own sake, immediate and long-term consequences notwithstanding.
INCREASE THE MAJORITY BY PURGING THE COALITION. Pete Stark for Majority Leader.
The overwhelming majority of rank and file Democrats support the public option and without it, support for health care reform collapses. So to whine that its a pander to San Francisco liberals is simply a lie. And seriously, if you have so little game that you're in jeopardy of losing to one of those Birther flat-earther dittoheads, we don't want you.
You do know the Tiebout residential choice model forward and backward, right?
UNINTENDED CONSEQUENCES. The American Association of University Professors has been sending me its mass e-mailings. Some of them amuse, but I don't have time for witty rejoinders. Don Boudreaux at Cafe Hayek does.

If you make the dismissal of adjunct professors more difficult, you’ll thereby raise colleges’ costs of hiring adjuncts. As a result, fewer adjuncts will be hired. So it’s doubtful that your efforts will help the very persons whose well-being you claim to champion.

What is clear, though, is that success at increasing the cost of hiring adjunct professors will benefit those of us who work as full-time faculty. Because adjuncts compete with full-time faculty, making adjuncts more costly to hire will raise the demand for, and hence raise the salaries of, full-time faculty. It will also prompt colleges to hire greater numbers of full-time faculty.

I'm not sure. Leave the faculty salaries the same, increase the size and number of classes in the job description, find people among the academic reserve army who will accept those terms.
CURMUDGEON'S CORNER. The Political Environment.
You know I'm an environmentalist, and heck, we own a Civic Hybrid, but if this Brookfield high school can give parking preference to students who drive hybrid cars to school, my first question is: why don't those kids walk or take the the school bus?
Probably one of those high schools where the faculty parking spaces have older and more modest cars, environmentally friendly or no.

No hybrid cars in the Cold Spring Shops motor pool, at least until there's something robust enough to tow a sailboat.

29.8.09

BREAKING CURFEW WITH HORNUNG AND MCGEE? One of Senator Kennedy's sons let the whole world know that his late father was offered a position with the Packers. That wasn't a state secret: an Indiana paper found mention of the offer on the late Senator's website.

Kennedy's promise on the football field had caught the notice of Green Bay Packer Head Coach Lisle Blackbourn. "You have been very highly recommended to us by a number of coaches in your area and also by our talent scouts as a possible Pro Prospect," Blackbourn wrote to the young Right End.

Kennedy declined the offer, saying he was flattered, but that he had plans to attend law school and to 'go into another contact sport, politics'.

Mr Blackbourn soon gave way to Scooter McLean, who was gone after one season. A little-known Army and Giant assistant named Lombardi came next.

MAX! That's five hundred dollars. Next time, it's a thousand. Max ... Oh, h**l, if you find something that's worth a thousand, let me know and I'll come along. (from one of Jerry Kramer's reminiscences.)

Given the late Senator's reputation for finding a good time, perhaps he would have helped the Packers' most notorious curfew violators find that thousand-dollar outing. On the other hand, contemplating even a younger Edward Kennedy blocking Ray Nitschke is not for the faint of heart.

28.8.09

EULER, EIGENVALUES, COMPLEX ROOTS, AND ZOMBIES. Voluntary Xchange came up with an instructive piece of applied mathematics.
Suppose we are able to quickly produce a cure for ‘zombie-ism’. Our treatment would be able to allow the zombie individual to return to their human form again. Once human, however, the new human would again be susceptible to becoming a zombie; thus, our cure does not provide immunity. Those zombies who resurrected from the dead and who were given the cure were also able to return to life and live again as they did before entering the R class.
The story sounds frivolous, but there's a real world application.

The key difference between the models presented here and other models of infectious disease is that the dead can come back to life. Clearly, this is an unlikely scenario if taken literally, but possible real-life applications may include allegiance to political parties, or diseases with a dormant infection.

This is, perhaps unsurprisingly, the first mathematical analysis of an outbreak of zombie infection. While the scenarios considered are obviously not realistic, it is nevertheless instructive to develop mathematical models for an unusual outbreak. This demonstrates the flexibility of mathematical modelling and shows how modelling can respond to a wide variety of challenges in ‘biology’.

There may be uses for the results in economics. Consider the logistic model of technology diffusion, which is a direct borrowing from epidemiology.

Professor Tufte:
I like this paper very much. I think it could actually be a good tool for teaching dynamic modeling in the classroom, and it comes with Matlab code.
I'm not sure that will impress David French (of The Foundation for Individual Rights in Education, at Phi Beta Cons.)

Aside from truly horrifying PC excesses, few academic absurdities capture the public imagination more (and draw greater conservative fire) than pretentious and frivolous academic research and "papers" on topics that have zero applicability to the world and do nothing more than further wall off academia from reality. Dead-serious panel discussions on things like the sex lives of feudal court jesters or the perceived latent racism in terms like "black ice" rightly draw hoots of derisive laughter and serious calls for reform. After all, what are you doing with all those hundreds of millions of tax dollars if you can afford to spend even one cent on such nonsense?

So it was with much vicious glee that I began reading a story that seemed to have all elements. Eccentric professor? Yes. This particular person changed his name so that it ends with a question mark (he is literally called "Professor Smith?"). Frivolous topic? Absolutely. Guided by Prof. Question Mark, his giddy grad students proposed to study the infection rate of a disease that exists only in the world of science fiction. Warm reception from the "mainstream" academic community? Definitely. The paper is to be published in Infectious Diseases and Modeling Progress, where it will appear between a paper on HIV and TB co-infection and a paper about the epidemiology of malaria. And finally, were these jokers European? Well, almost. They were Canadian — from the University of Ottawa to be precise.

That question mark is probably a glitch going from a technical word processing program into Adobe. The reaction people have to the paper might say more about their familiarity with mathematical modeling than it does about their position in the Canon Wars. Somebody help me out: doesn't one version of the pneumonic plague have a way of going dormant, or am I thinking about Ebola?
WE DO IT WITH WAY LESS. In July, I compared Harvard College's operating deficit with our College of Liberal Arts budget.
It is, however, that $220m I wish to address. The organization chart is different at Northern Illinois University, but the operating budget of our College of Liberal Arts and Sciences, inclusive of external funding, is on the order of $100m, if memory serves. Their deficit could cover our expenses, and we may have more students on probation than they admit, to boot.
My memory didn't serve me. The operating budget of Liberal Arts is $70m, of which about $50m is tuition and state assistance. (My previous estimate overstated the external funding part.) Another $30m goes a long way toward operating Engineering as well. Let our cheers resound for Northern.
OBSERVATION OF THE DAY. Bruce (Bootleggers and Baptists) Yandle:
While the clunker program has been hugely successful in the eyes of Obama administration officials, the auto industry, and the consumers who received transfers from the rest of us, there is serious doubt that the program is all that successful when final costs are counted. The doubt arises for at least three reasons. First, the program was supported politically primarily for its much touted environmental benefits. Carbon emissions would be reduced. But the reduction costs are at least ten times higher than alternate ways of removing carbon. Second, there is Bastiat’s parable of the broken window to consider. And third, there is a serious matter of eroding social norms for conserving wealth. A crushed clunker with a frozen engine is lost capital.
Not to mention the knock-on effects of a smaller stock of used cars to filter down to liquidity constrained buyers, and the substitution effects of more reliable and less costly to operate cars on miles driven. (Via Cafe Hayek.)

The cash-for-clunkers program has kept my 'phone ringing with inquiries from the fourth estate. I'll link to any articles that follow.
N.O.C.D. Old Money distances itself from New Money.

27.8.09

GET TO WORK ON THE FIRST DAY. E. Frank Stephenson starts introductory economics.
I start--even before the blah blah of the syllabus--with a trading exercise. Each student receives a small item such as a small item such as a tube of toothpaste or a bad of chips. I try to include a few items that might have a giggle factor or a yuck factor--a can of dip, a bottle of nail polish (given to a male student), or a can of Spam. Students can then exchange items with other students. I find the exercise lets me cover lots of ground--voluntary exchange, subjective value, trade-offs/opportunity cost--and to do so in a way that serves as a light-hearted ice breaker for the semester.
In the comments, Steven Horwitz suggests that the course outline and other administrative stuff can wait.
I should note that the general idea Frank and I are on to is great pedagogy in any class: start class with a discussion of the most important, sexiest, most counter-intuitive ideas you can muster and send the message to students that this class is about ideas and learning, not how many papers or exams they'll take or what the attendance policy is. It's IDEAS first and foremost. Not even discussing the syllabus until the second day of class reinforces that message even more powerfully.
There's a Council for Economic Education lesson plan for that trading activity in one of its publications (those are at my office, not at Cold Spring Shops headquarters.)
LOGIC AND CONTENT CAN CARRY THE DAY. Nick Gillespie reminds readers that liberal lions can lie down with libertarian Rands.
There is, buried deep within Kennedy's legislative legacy, a different set of policies worth exhuming and examining, precisely because they were truly a break with the normal way of doing business in Washington. During the 1970s, Kennedy was instrumental in deregulating the interstate trucking industry and airline ticket prices, two innovations that have vastly improved the quality of life in America even as—or more precisely, because—they pushed power out of D.C. and into the pocketbooks of everyday Americans. We are incalculably richer and better off because something like actual prices replaced regulatory fiat in trucking and flying. Because they do not fit the Ted Kennedy narrative preferred by his admirers and detractors alike, these accomplishments rarely get mentioned in stories about the late senator. But they are exactly the sort of legislation that we should be celebrating in his honor, and using as a model in today's debates about health care, education, and virtually every aspect of government action.
The deregulation in transportation and energy began at the national level in the Carter administration, with Cornell's Alfred Kahn leading the way in intrastate telecommunications in New York before going on to the Civil Aeronautics Board. Leftish historian Gabriel Kolko uncovered the Other Than Wise Experts behind railroad regulation, and Ralph Nader's study group found little to like in railroad regulation as practiced.
PLANNED OBSOLESCENCE BECOMES PUBLIC POLICY. A few days ago, I provided an interview to The Daily Herald for an in-depth report on cash-for-clunkers that is still in press. Now, from the same source, comes news of a similar incentive to buy new appliances.
This year's stimulus bill funded a $300 million program that will offer rebates of varying amounts - possibly up to $200 - to buyers of energy-efficient appliances and other products that carry the "Energy Star" label.
To some extent, my response to this program is similar to my reaction to cash for clunkers. It will help move inventory out of showrooms, and retailers might want to replenish inventories. There's less assurance that idle factories will again be humming, as appliances, like cars, are postponable items. There's less of a cascading of older appliance models to resale than goes on with cars. I'd have to research one other point, but if Energy Star compliant appliances tend to be the larger models, the energy intensity of a range or refrigerator of a given size decreases, but people who are looking for a smaller model will be disappointed.

Both cash-for-clunkers and appliance replacement subsidies take as given the current productive capacity in automobile and appliance manufacturing. Bearing in mind the adjustment cost that automobile and appliance workers would face, is it any better for the government to keep the existing capacity active than it is for the manufacturers (per John Kenneth Galbraith and Vance Packard) to do so?
THIS EVENING'S RAILROAD READING. MetroRider LA, an urban transit interest site, has been recommending a number of sources for further reading. On the reading list, Cold Spring Shops.
Cold Spring Shops earns a stop “On the i10erary” for its rich news and opinion on rail matters, as well as a delightful and consistent use of railroad terminology throughout the site. Links are grouped under categories like “Common Carriers,” “Company Mail” and “Reciprocal Switching.”
The recommendation notes difficulties using the Blogger search and permalink features. How long is seven calendar years on the same platform in internet years?

Thanks for looking in.

23.8.09

GETTING AND SPENDING WE LAY WASTE OUR POWERS. I sometimes wonder if William Wordsworth wrote all those gripes about the early industrial era as a reaction to the newly-built Lancaster and Carlisle bringing day-trippers to the Lake District. There's a strain of disdain for people in environmentalist thinking, and Alan Weisman's The World Without Us, the subject of Book Review No. 32, plays to that strain. There are three major themes in this book. The title considers what would happen to our creations if for some reason we weren't around to maintain them, providing the first theme. The second theme extends the first, with a focus on oil tanks and nuclear waste that could provide a nasty surprise for future archaeologists, whether arriving from space or as representatives of the next iteration of sapient beings to take advantage of whatever niche they find. (I suspect the nasty surprise is more likely to come to a future explorer rendered illiterate by years of inclusive education or rendered vulnerable to something more real than Tutankhamun's curse by future generations' neglect of ancient languages.) The third theme, which provides the author with a way of contemplating what a world without people would look like, is a celebration of areas such as forests, tundras, and tropical reefs that have not had the opportunity to adapt to humans. That those areas include former military bases, the demilitarized zone of the Koreas, and Hermann Goering's old hunting preserve ought give preservationists pause.

The author corresponded with numerous scientists and advocates in writing the book. The science is reasonable. The advocacy too often tends to the disdain for people strain of environmentalist thinking. My use of the expression "opportunity to adapt to humans" suggests a reaction to that disdain. Finches on the Galapagos, to use a popular example, show great facility at selecting for beaks more effective for the prey in the neighborhood. When the finches demonstrate their effectiveness by removing the prey, the logic of the predator-prey cycle tells us what happens to the finches. Humans show great facility at selecting for methods of domesticating and conserving prey and for selecting for ability to recognize improvements and provide methods for making those improvements in the use of their environment. (Put bluntly: radioactive waste is a source of energy we haven't yet figured out how to use effectively, and species extinction means we haven't thought through the predatory-prey cycle as well as we might). The author treats the adaptation of flora and fauna in the absence of people as nature taking its course, but too often takes the point of view of people understanding and adapting to what plants and animals do as an insult against life itself. That's probably an error.

(Cross-posted to 50 Book Challenge.)
HOW OTHERS SEE US. Tom McMahon compiles three charts from Carpe Diem. I have good reason to gripe about administrative bloat. I suppose "run higher education like a business" means tack on additional layers of management.
OPPORTUNITY COSTS. On a summer road trip, I caught a snippet of a radio report on Six Flags filing for bankruptcy that I thought mentioned something about the park's real estate holdings losing value. It's possible that capital losses contributed to the bankruptcy, but the simpler explanation might be a strategic mistake by management.
[Chief executive Mark] Shapiro, who is 38 years old, says he wants to attract a family crowd with more modest roller coasters and kiddie rides. The new Dark Knight coaster at Six Flags Great Adventure in Jackson, N.J., tied to the latest Batman movie, cost about $7.5 million to build, compared with $20 million or so for giant coasters such as the Goliath, in Georgia. Its top speed is just 30 mph, less than half of Goliath’s top speed. It’s housed in a dark building, which makes it harder to notice how much smaller it is than its high-octane competitors.
This defeat has several fathers.

Washington Redskins owner Daniel Snyder, whose investment company was a large stockholder, began pushing in 2004 for Six Flags to bring in new management, sell off some parks, and begin going after families rather than thrill-seeking teenagers.

In 2006, after cleaning up its parks and adding some new rides, management raised admission prices by $5 to $10, driving the ticket price to as high as $40 in some markets. But attendance dropped below 25 million in 2006, from 28.7 million in 2005. “Our lack of pricing power was really a big surprise to me,” says Shapiro.

In 2006 and 2007, Six Flags sold 10 parks and a 100-acre lot in Houston for about $400 million, hundreds of millions less than anticipated, according to [Jeffrey] Speed, the company’s CFO. Snyder had set a goal of trimming debt to less than $2 billion. But with the real-estate proceeds going to finance operations, the debt remained at $2.4 billion. Rivals such as Cedar Fair and Universal City Development Partners, whose theme parks include Universal Studios Florida, carry much smaller debt loads relative to their cash flow.

Shapiro hasn’t wavered from his view that the old amusement-park formula — build bigger and better roller coasters as often as possible — isn’t a moneymaker. He says he’s not overly interested in the typical teenage fans of such rides, who were once Six Flags’ best customers. He is courting parents, young children and corporate groups, and is emphasizing rides tied to movies and cartoon characters, which can generate T-shirt and sweatshirt sales.

There's probably a case study in failing the market test here.

In 2007, Six Flags sold off seven additional parks.

The company still has not reopened its New Orleans theme park, which it claims suffered substantial damage caused by Hurricane Katrina in 2005.

Scott Rothbort, a New Jersey-based investment adviser and professor of finance at Seton Hall University's Stillman School of Business, says Six Flags may indeed need to sell off some parks.

"It's just a bad business model," Rothbort says, summing up Six Flags' ongoing struggles.

"None of this surprises me," says [International Theme Park Services president Dennis] Speigel about Six Flags' planned cuts.

Nor would he be especially surprised if Fiesta Texas or the real estate beneath it were eventually sold.

Perhaps real-estate speculation is inherent in accumulating amusement park holdings. Particularly in the north, an amusement park (like the nearly-vanished drive-in theaters) generates a great deal of activity for only a few months, but its land has the potential to generate activity all year around. Consider Great America in Gurnee, close to several outlet malls, a major metropolitan area, and just outside the Lake Michigan watershed. I'd be surprised if somebody isn't contemplating what an office park (perhaps catering to retailers?) might do on those grounds. Many trolley parks near large cities became subdivisions years ago, if subdivisions bereft of rapid transit service to the central business districts. An American Profile article on one of the last kiddielands explains the dynamics.

Bartlesville's Kiddie Park is one of 14 such parks that endure across the nation. About 200 were in operation during their post-World War II heyday, according to Jim Futrell, historian for the National Amusement Park Historical Association and author of several books about the history of amusement parks in America.

As soldiers returned home and started families and people moved to the suburbs, the demand for family entertainment led to the development of amusement parks with small-scale rides for children. The Allan Herschell Co. in North Tonawanda, N.Y., sold entrepreneurs a ready-made package of rides designed for children.

Most of the parks were short-lived, though, because they catered only to families with small children and were located on prime real estate. "They quickly fell out of favor and were largely gone by the 1970s," says Futrell, 44, of Bethel Park, Pa.

Rising land values contributed, but hidden in that fell out of favor might be a change in attitudes toward children, those years being the era of The Population Bomb and other environmental excesses, Rosemary's Baby and related cultural excess, the onset of no-fault divorce, and the workings of the Say Aggregation Principle on stay-at-home parents.

22.8.09

PENALIZED FOR BEING COOPERATIVE. Reassigned Time questions the utility of office hours, conventionally understood.
In other words, scheduling those four hours, clearly listed on the syllabus, will not necessarily get students in to see us, nor will it necessarily make us available for individual consulation. I'll admit freely that when I scheduled the four hours I was a person who would try to make some office hours times when I knew it was unlikely that students would show. Why? Because I knew that I'd end up scheduling meetings outside of office hours with students, and I'm totally not a fan of uncompensated and unrecognized labor. Scheduling inconvenient office hours was a way of protecting my time, at a time when I felt like I needed to follow the letter of the law even if not the spirit of it. As I got more comfortable in my job, I realized that what mattered most was the spirit, and not the letter.
The post lays out a number of trade-offs a faculty member makes in scheduling office hours, particularly where university rules require faculty to declare and keep a set schedule.

Measure inputs, not outputs, anyone? It does no good for the real mission of the university if the professor complies with the letter of the law by publishing office hours strategically chosen to inconvenience students. It also does no good for the real mission of the university to treat by-appointment-at-other times as uncompensated and unrecognized labor. (Under that kind of time accounting, I've probably accumulated enough evening and weekend and informal chats at the coffee house and late night electronic mail checking before exams to mark off for an entire semester.)

The posts that inspired and were inspired by the Reassigned Time post are more instructive. Historiann deals with the more general issue of how-much-of-collegiality-is-helping-colleagues-raise-their-kids. (My position: it's unreasonable for people with kids, or people with longer commutes, to use either of those criteria as reasons to beg off duties or reject proposed meeting times. Such stunts deprive the people without kids, or sometimes partners, of the opportunities to, well, have a life also.)

Where we live, and whether we choose to reproduce, is a choice, not an unavoidable obligation or accident, and we all have to arrange our personal lives around our work responsibilities. That, it seems to me, is a minimum qualification for retaining one’s job. So it’s not that your colleagues’ families “prevent them from performing some of their duties;” your colleagues are choosing not to perform some of their duties. It’s reasonable, in my opinion, to want to restrict on-campus days to one’s teaching days, especially if your department is one that expects a certain level of research productivity, but having a 2- or 3-day a week schedule is a privilege, not an entitlement. We all should understand that if department meetings, job talks, special guest lectures, and the like are scheduled on a non-teaching day, we need to make the schlep. (And, by the way: it’s really uncool for people who are on Tuesday-Thursday schedules to complain about having to come to campus a burdensome THIRD DAY of the whole week! Besides: by the time you’re an Associate Prof., you’re on campus 3 days a week, no matter what your teaching schedule is.)

It is unacceptable and unfair to use one’s family life–or any other chronic excuse–to duck out of work, regardless of the sex of the ducker. (I hear you when you say you fear that your female colleague is reinforcing all sorts of stereotypes about mothers in academia–but the problem really is gender-neutral, and should be addressed in that fashion.) Somehow, your colleagues manage to find child care when they need to teach their classes or to get some research and writing done–and if they can find child care to do the parts of their jobs they find pleasurable and interesting, then they can find day care, babysitters, or neighbors to help out when they need to attend meetings and meet with advisees.

That second paragraph also applies to living at a distance. That was a sore point with many faculty members, particularly in administration at Wayne State, which was close enough to Ann Arbor that a substantial number of faculty would live there rather than in Detroit or one of the closer suburbs. Ann Arbor is a better choice on aesthetic grounds, but it's not a gated community with limited access to Detroit. It's also a sore point at Northern Illinois, which is close enough to Chicago that a substantial number of faculty live in the Fox Valley. Those suburbs are generally reverse-commute to DeKalb.

The dean at Anonymous Community suggests the sore point is endemic to higher education.
In theory, of course, there's nothing stopping professors from coming to campus on days when they don't have classes or scheduled office hours, and some do. But experience has taught me that a non-trivial number of people will minimize their number of days on campus per week, then used jam-packed days as excuses to avoid any and all college service. I've seen it happen enough times to appreciate the value in just ensuring that people are physically present a certain amount of time. When half the department shirks service, the other half typically picks up (most of) the slack, completely uncompensated. And I've heard "I'm not driving to campus just for a meeting" enough times not to discount it. There's a reason that the phrase 'full-time' specifically references 'time.' Some elements of the job can't be done from afar, so a too-quick abandonment of office hours would dump those elements entirely on an unlucky few.
The additional service doesn't have to be uncompensated, although a department has to write cumbersome rules to ensure some sort of compensation while not inducing inefficient substitution toward committee work rather than scholarship of some kind.

21.8.09

THIS WINTER'S PROJECTS. I'm slowly getting the finishing touches on the Andreyev. There's been some time to contemplate the next project, which requires a great deal of coarse work with hacksaw and file on the brass components.


There's a Precision Scale kit of the trailing truck with booster as a separate sub-assembly, another Precision Scale kit of a believable cab interior, and the tender trucks are major projects.


When I finally work up the courage to scratchbuild a slope-front cab (there being a project that calls for one) I'll probably lay both sides and the back out as one piece. Note the solder joints: there are two small front pieces tacked to the side, with the two sides tacked to the end. A sub-assembly of one piece, with the roof tacked to it, has to be easier. The fairing-in of the roof and turret casing pose challenges of their own. Figure some progress on that around Thanksgiving.
WAL-MART IS TO VLASIC, REDUX. It's unusual for a Common Dreams essay to say something nice about Wal-Mart. Leslie Savan manages.
Maybe the real turning point came when [Representative Anthony] Weiner [of New York] asked, "How does Wal-mart offer $4 prescriptions?" Joe [Scarborough] and co-host Mika Brzezinski looked as if they'd been thwacked by a hardback copy of Atlas Shrugged, and sat back to let the congressman explain it all to them:
They go to the pharmaceutical companies and say, "Listen, we have a giant buying pool here. You're going to give us a great deal."

Who's bigger than Wal-Mart? We are, the taxpayers. Do we do that? No. Because we have outsourced this to insurance companies who don't have necessarily as much incentive to keep those costs down because, frankly, they are getting a piece of the action.
Progressives tend to understand this stuff, but many conservatives won't trust such logic, especially in the abstract, which is how most Dems have been communicating. But Weiner, aware that if you can't visualize something it ain't going to stick, argued with a specific, familiar visual--that of a successful, supercapitalist, and, as Mika might say, "real American" company.
Is the missing incentive capitalist greed? If so, is it a consequence of employer-based health insurance provided by existing duopolies, or a consequence of insufficient competition for the risk managers who convert premiums into railroad equipment trust certificates, or do they convert lease payments into reimbursements?


What happens if Wal-Mart manages to drive down the wholesale price of pills by squeezing its vendors, as its critics suggest is business as usual in Bentonville? Those practices induced several Congresses to pass, and several presidents to sign into law, assorted price-discrimination and small-retailer protection statutes. Presumably the laws would not apply to ConCare.

An anaesthesiologist suggests ConCare's monopsonistic practices would put some vendors out of business.

The progressives' third mistake is to skimp on anesthesiology. In no medical specialty is the spread between the Medicare rates and private insurance rates greater. Progressives expect to pay anesthesiologists Medicare rates, which are 65% less than private insurance rates, without any change in the system. But there will be changes.

Some anesthesiologists will leave the field. They are already faced with lawsuits at every turn. Something else has happened in America that threatens to tip the balance for anesthesiologists. Americans have grown very fat. This complicates anesthesia tremendously. Putting in IVs, spinals and epidurals is harder. Inserting breathing tubes is much more dangerous.

Quality of care will inevitably decline. That decline will come first in obstetrics. At the hospital where I work, two anesthesiologists work in obstetrics almost around the clock, so that a woman in labor need not wait more than five minutes for her epidural. Other hospitals are less fortunate, and have on staff at most one anesthesiologist in obstetrics. The economic crunch will eventually force these hospitals to cover obstetrics "when anesthesiology is available," meaning in between regular operating room cases.

During an obstetrical emergency, these short-staffed anesthesia departments will scramble to send someone to perform the C-section. Don't forget, a baby has only nine minutes of oxygen when the umbilical cord prolapses, so time is of the essence.

The doctor's column envisions some private insurers coexisting with ConCare. Another Wall Street Journal essay (via Betsy's Page) intended as a criticism of ConCare is really about the logic behind treating ConCare as a legal monopoly.

Among the biggest reasons is a severe adverse selection problem: The sickest, most expensive patients crowded into [Maine's] DirigoChoice, unbalancing its insurance pool and raising costs. That made it unattractive for healthier and lower-risk enrollees. And as a result, few low-income Mainers have been able to afford the premiums, even at subsidized rates.

This problem was exacerbated because since the early 1990s Maine has required insurers to adhere to community rating and guaranteed issue, which requires that insurers cover anyone who applies, regardless of their health condition and at a uniform premium. These rules—which are in the Obama plan—have relentlessly driven up insurance costs in Maine, especially for healthy people.

Maybe the healthy people move to New Hampshire.
The Maine Heritage Policy Center, which has tracked the plan closely, points out that largely because of these insurance rules, a healthy male in Maine who is 30 and single pays a monthly premium of $762 in the individual market; next door in New Hampshire he pays $222 a month. The Granite State doesn't have community rating and guaranteed issue.
In order to gain the benefits of the largest possible risk pool, ConCare legislation might have to require universal participation. In doing so, however, the agency would lose the benefits of independent competitive discovery of the underlying risks. Perhaps the economics of national publicly-provided insurance come down to trading off the benefits of risk pooling against the benefits of competitive discovery, however much of that goes on in a duopoly or triopoly.

19.8.09

FOR YOUR OWN GOOD. Peter Ubel is a physician, and he sees people doing things that, while fun in the short run, are unhealthy in the long run. Yes, that's when Keynes says we're all dead, but Dr Ubel's thesis is that short run suboptimization accelerates the long run. And public policies that let people react to those short run incentives are part of the problem. Thus Free-Market Madness: Why Human Nature is At Odds with Economics -- and Why It Matters. I'll let the author write Book Review No. 31.
I write this book to highlight some of the dangers of liberty, but even more importantly to show how restricting some kinds of liberty can improve people's health and well being. I intend to highlight the harms that can befall people when capitalism meets human nature -- when their freedom to behave in the marketplace confronts their propensity to make flawed decisions.
People eat junk food because it tastes good and because it's cheap. That's the short form. The author does tackle some of the more challenging problems in economics. Where information is costly, discount rates aren't easy to establish, and there's plenty of experimental evidence that people react to prospects of loss differently than they do to prospects of gain, expected value otherwise equal, risk-aversion notwithstanding. Thus obese people and smokers and all the other ills that people subject themselves to, and quite possibly regret later. Dr Ubel's prescription:
When people fail -- fail to eat right, exercise, or stay away from cigarettes; fail to save for their futures or invest time to develop good habits -- we should at least be able to go to bed at night knowing that we didn't promote free market policies that doomed them to fail.
Advocates of food stamps and social security and inclusive government schools presumably can sleep soundly.
People deserve a large amount of freedom. But they also deserve to live well. And when freedom and well-being collide, we should be open minded enough to recognize that carefully calibrated restrictions on our freedom are a small price to pay for a healthier, happier populace.
In a world of costly information, that calibration need not be the province of experts in the employ of government.

(Cross-posted to 50 Book Challenge.)
THE PACE WOULD PLEASE NEITHER YERKES NOR INSULL. The Chicago Transit Authority plans to extend the Dan Ryan, Midway, and North Shore Skokie lines. The editorial board at the Chicago Tribune approves.
Extending the Chicago Transit Authority's Red, Orange and Yellow Lines has been debated for decades, long enough for entire generations of commuters to have come and gone. But these extensions made good sense when they were proposed back in the 20th Century -- and they make good sense today.
Residents of the relatively poor neighborhoods of the Southeast Side and Southwest Side, who have never had rapid transit, tend to approve.

Residents of the Skokie-Old Orchard neighborhood, which was once home to the Mother of All Bullet Trains, aren't keen on the idea.
For the most part, the 1.6-mile leg from the Skokie Swift Terminal north to the Old Orchard shopping center area would pass through open space, industrial areas and run along the eastern frontage of the Edens Expressway. The route would end near Niles North High School.

A three-block cluster of homes near Golf Avenue is in the path of the proposed elevated line. With power lines towering nearby, many of these homes along Terminal and Laramie Avenues are near recently dormant freight tracks. "It's the route of least resistance," said Steve Marciani, planning supervisor for Skokie. "The power lines have always been there, and the railroad was there until a couple of years ago."
The railroad that recently left there was Union Pacific's former Chicago and North Western line that ran from Mayfair to a connection with the Freight Main near Deerpath with another line that connected to the Passenger Main in Wilmette.

The power lines once marked the tracks of another railroad.


Harmswoods Station at Golf Road, looking southeast.
George Krambles photograph from B-107 Route of the Electroliners.

The proposed extension of the Skokie Swift will deviate from the current right of way to run into Old Orchard shopping center.
Elevated tracks would be built to carry Yellow Line trains over the 1.6-mile extension from the current terminus at Dempster Street to a station at Old Orchard Road, between the Edens Expressway and Niles North High School, near Old Orchard.
The article suggests a single-track elevated structure, which immediately constrains future train frequencies, and the terminus at Old Orchard precludes easy extension to Northfield, Briergate, and Deerpath. I've read that Chicago and North Western purchased one track from the estate of the North Shore Line to preempt extension of Transit Authority service in competition with its bilevel streamliners. (There were detailed plans to run the Transit Authority to Clavey Road or possibly Mundelein, and some experimental cars were built with that possibility in mind.) Union Pacific might be pleased to be out from any plans to run commuter trains onto the Freight Main, which would be feasible if at some expense.
POOLING AND SEPARATING EQUILIBRIA. Maha likes the large numbers argument for government-mandated (and provided)? health insurance.
Insurance works by risk pooling — everybody throws money into a pot so that there’s money for people who are hit with unexpected expenses. In order for this to work, in any given year most of the people in the pool throw more money into the pot than take it out. Generally, the bigger the pool, the better it works. Insurance companies invest the premium money, and they make most of their profits from investments.
Thus, a single carrier is by definition able to pool risks more effectively than competing carriers (leaving aside for the moment the problem of valuing risk without a market test) and a single carrier enjoying the force of law has higher exit costs for people who know they are subsidizing others. Pooling equilibria are therefore fragile, as participation is not incentive-compatible for everybody, and that's why automobile insurance (required by most states) comes with experience rating and with choices.

I left that last sentence in as it is also instructive. Many advocates of the government insurance company suggest that, as there is no residual claimant, the operating costs of that insurer will be lower. Is that accurate? Perhaps such an insurer, if it did crowd out all private insurers, could act as a monopsonist with respect to risk managers. (Higher education acts as a monopsonist with respect to humanities Ph.Ds. Discuss.) On the other hand, an insurance company cannot do better with its investments, adjusted for risk, than an investment bank. If that is the case, is it the insurance premiums that provide the profits, or is it the investments of premiums?

In a column dealing primarily with the inefficiency effects of favorable tax treatment for health insurance as a fringe benefit, Martin Feldstein identifies the incentive for participants in a pool to self-select out.

The best solution to this problem of private overconsumption of health services would be to eliminate the tax rule that is causing the excessive insurance and the resulting rise in health spending. Alternatively, Congress could strengthen the incentives in the existing law for health savings accounts with high insurance copayments. Either way, the result would be more cost-conscious behavior that would lower health-care spending.

But unlike reductions in care achieved by government rationing, individuals with different preferences about health and about risk could buy the care that best suits their preferences. While we all want better health, the different choices that people make about such things as smoking, weight and exercise show that there are substantial differences in the priority that different people attach to health.

And perhaps, worst case scenario, in the priority that an insurer attaches to a policyholder receiving treatment?
A TOWN RUNS A PIER NEAR NANTUCKET.

Its price is so low boaters are ...

The captain of the boat met us at the town pier, loaded us onto a small skiff, and then took us to a mooring out in the harbor, where the boat was waiting.

He explained to us that he would prefer to keep his sailboat at the pier, which would make loading and unloading passengers much easier, but he could not get a space there. Every year, he told us, the town has a lottery to allocate the right to rent one of the scare docking slots. For quite a few years, the captain has been putting his name into the lottery, but he has never won. "There are just not enough spaces," he said.

Ever the economist, I replied, "It seems to me that the price isn't high enough."

"Well, actually," the captain said, "if you want to pay more, you can go down there." He pointed to the next dock over.

Apparently, next to the town pier is another pier that is privately owned and operated. The price for a docking space there is about five times as high as it is at the town pier. But there is never any significant shortage. Anyone can sign up for a slot, as long as you are willing and able to pay.

What a wonderful illustration of basic economic principles! In one way or another, scarce resources need to be allocated among competing uses. Free markets typically use the price system. Governments, often in the name of "fairness," seem to prefer other mechanisms, which don't always direct resources to their highest value use.

There will be a quiz later.
REALITY CHECK. The dean at Anonymous Community contemplates crowded commuter lots.

We've had some talk of congestion pricing -- require a paid permit for prime time, but allow free parking during off-peak periods (i.e. late afternoon). The problem there is that anything regressive enough to make a difference would crash into our 'accessibility' mission, and anything sufficiently painless as to be completely nondiscriminatory would also be ineffectual. There's also an issue of inflated expectations when students actually pay. Not being able to find a free space is annoying, but not being able to find a paid space feels like being ripped off.

In a few weeks, we're going to get an entering class of a magnitude we haven't seen before. I wish them well in their quest for parking spaces.

Evaluate the generalization to health. In your essay, consider the parallels between the joint costs of producing a parking space for mid-day that is also available at night and a new therapy, and the effects of the Baby Boomers exercising their prescription drug benefits. Bonus points: why is a policy of rationing-by-congestioning midday and rationing-by-inconvenience in late afternoon discriminatory, even though there is no parking charge for anyone.
BARACK MILHOUS OBAMA? Atlantic Blog raises the possibility.
Obama is trying out Richard Nixon's "silent majority" line. Of course, it is worth remembering that Nixon, unlike Obama, had a serious and vastly better point to make.
With video arguing that case.

16.8.09

ALLOCATING SCARCE RESOURCES. Betsy Newmark.
[T]he first lesson a student learns in introductory economics is the concept of scarcity.
Camille Paglia.

Obama's aggressive endorsement of a healthcare plan that does not even exist yet, except in five competing, fluctuating drafts, makes Washington seem like Cloud Cuckoo Land. The president is promoting the most colossal, brazen bait-and-switch operation since the Bush administration snookered the country into invading Iraq with apocalyptic visions of mushroom clouds over American cities.

You can keep your doctor; you can keep your insurance, if you're happy with it, Obama keeps assuring us in soothing, lullaby tones. Oh, really? And what if my doctor is not the one appointed by the new government medical boards for ruling on my access to tests and specialists? And what if my insurance company goes belly up because of undercutting by its government-bankrolled competitor? Face it: Virtually all nationalized health systems, neither nourished nor updated by profit-driven private investment, eventually lead to rationing.

Profit-driven private investment implies rationing by price, and a different set of trade-offs. Public policy, however, trades off higher prices in order to allow additional choices, at least where goods such as oil or steel or aluminum or dry goods are concerned.

Christopher Beam.

In many countries, the government actually puts an explicit dollar amount on saving a life. Britain, with something called the "quolly," is the clearest example. The metric is the Quality-Adjusted Life Year, or QALY, basically a measurement of time adjusted to account for your health. Everyone gets a rating between 1 and 0: One means you're perfectly healthy. Zero means you're dead. Anything in between stacks the quality of your life against that of a healthy person. For example, if you have "some problems with performing usual activities, some pain or discomfort," you get a rating of 0.76. If you're depressed as well, your score drops lower. Someone in extreme pain or discomfort who can't wash themselves and is depressed might even get a negative rating. (For a better explanation, see here. For an even better one, here.)

Medical treatments are then assessed according to their cost per QALY. Say you have cancer and there is a $100,000 treatment that would extend your life by five years, but those years would be painful. You might get a score of 0.20, which would make those five years equal to 1 QALY. Under the British system, then, this treatment would not cost $20,000 per year—it would cost $100,000 per QALY. This system allows doctors to compare the efficiency of treatments for different diseases, whether it's HIV or depression or Alzheimer's, on the same scale. It also gives the government a metric by which to cap spending. Right now, the British health care system generally doesn't cover treatments that cost more than about 30,000 pounds per QALY. (That's about $50,000 at today's exchange rate. This is what people mean when they talk about rationing.)

Such a policy implicitly involves capital rationing. Consider a research project that could reduce that 100K (60,000 pounds) to 30,000 pounds for the same outlay as another research project that reduces 35,000 pounds to 25,000 pounds. Which one gets funded?
SOME PERSPECTIVE. Neil Steinberg of the Chicago Sun-Times gags on the Woodstock retrospectives.
OK, 400,000 people gathered for a rock concert and didn't kill each other -- big flippin' deal. Ten years later, in 1979, 1.2 million people showed up in Grant Park for a mass with Pope John Paul II, and you never hear them claiming it was a rend in the time-space continuum. Even more people are flocking to the lakefront for the Air & Water Show this weekend, and we don't act like it's some giant epochal moment -- just another summer weekend in Chicago.
A summer weekend on which the limitations of one platform at Elburn present themselves. At the station is an extra train that will leave at 10.15. With centralized traffic control, radio requests to pass the work zones, and mostly wholesale freight railroading, the discipline of "display signals and run as first 504" and "second 504 leaves Elburn at 10.15 making scheduled stops to Villa Park" isn't required. But while Second 504 is awaiting time, that's 501, which will turn to become 506, waiting to get to the platform. Most of the traffic is headed to the air show or baseball. There won't be many passengers inconvenienced by the wait. Further back is a stack train waiting its turn at Rochelle.

Passenger loadings were heavy on all lines. I rode several trains to a number of hobby stores. There's a pretty dependable 20 minute connection from the Northwest to the West, but I had about seven minutes to make that connection.

On the matter of Woodstock, Rick Moran offers additional perspective.

Glorifyng the 60’s as a time that should be emulated is myth making. In 500 years, the only thing remembered about the 60’s will be the Apollo moon landings and perhaps the struggle to codify into law the civil rights of Americans who had been previously denied them. Woodstock will be a footnote - if that - and a curiosity for historians of the future who will wonder why everyone was making such a big deal out of it.

The Chicago air show, however, did not include a visit by the next-generation Rutan launch vehicle. Perhaps there will be improvements on it in the next 500 years.

A CLASS PROJECT WORTHY OF VINCE LOMBARDI. I give you the Cut Block Simulator.

Craig Rusch had plenty of down time on the sidelines during the fall of 2007. After a season-ending knee injury, it was watching and waiting with a little time to reflect and daydream.

He watched practices he couldn’t compete in, film he wasn’t in and drills – like a cut-blocking drill where coaches rolled a 60-pound ball at defensive lineman – he couldn’t participate in.

One day – he doesn’t remember which one – an idea came to him.

What if there was a better way to simulate a cut block?

It's Rube Goldbergian, but it works.

Once the sled was complete, it was time for the class presentation.

While the sled didn’t fit in the classroom, it was rolled into the engineering building for the presentations encore.

When the three students walked into the room to present, they were a bit surprised – it was packed. NIU coach Jerry Kill was there with defensive coordinator Tracy Claeys, defensive line coach Jeff Phelps, athletic director Jeff Compher, members of the engineering industry and a whole lot of family members.

Patent pending.
WAL-MART IS TO VLASIC AS CONCARE IS TO? Robert Reich:
Being the one public plan, it will have large economies of scale that will enable it to negotiate more favorable terms with pharmaceutical companies and other providers. ... But this won't lead to a government takeover of health care. The whole point of cost containment is to provide the public with health care on more favorable terms. If the public plan negotiates better terms—thereby demonstrating that drug companies and other providers can meet them—private plans can seek similar deals.
Where shall we begin? If Wal-Mart negotiates better terms, Dayton-Hudson can seek similar deals. Or has Wal-Mart solicited a discriminatory price cut that leads to a substantial lessening of competition or a tendency to create monopoly? Does the argument generalize? Or, will cost containment mean lower prices for current pharmaceuticals at the expense of future development?
BEER IS FOR SWILLING. Some Cubs fans have trouble holding their Old Style.

11.8.09

YOU HAVE TO MAKE THE CASE, COUNSELOR. Some time ago, I purchased Laura Ingraham's Shut Up & Sing: How Elites from Hollywood, Politics, and the UN Are Subverting America. The book dates to 2003, just before the liberation of Iraq started turning into real work, and before the 2004 hopes by the Republicans of a permanent majority. Thus, to a great extent, the work is overtaken by events. That's unfortunate, as the author would like to make the case for majority rule, individual rights, equality of opportunity, and limited government, four things that are contested territory at the moment. Such a case is serious work, but a recitation of anecdotes held together with guilt-by-association and run through the Regnery rhetoric machine doesn't make the case. Begin at the beginning.

Meet the elites.

Who are they? Essentially elites are defined not so much by class or wealth or position as they are by a general outlook. Their core belief -- embraced with a fervor that does not allow for rational debate -- is that they are superior to We the People.

(On the other hand, the author later expresses surprise that South Dakota's Tom Daschle becomes a leader for these elites. I'm too tired to work through the implications of that.)

Thus, Book Review No. 30 is of an unsatisfactory effort to support political positions that are intellectually defensible. There is material, particularly in the sections on immigration and business, where stronger are necessary and feasible. The book is neither likely to change many minds nor to provide readers the intellectual ammunition to do so.

(Cross-posted to 50 Book Challenge.)
"DEATH PANEL" IS LOADED TERMINOLOGY. Perhaps so, but where scarce resources have to be allocated among competing uses, somebody has to make the tough decisions. Because there is no medical college at Northern Illinois University, some of the medical journals are not available through our library, which limits me to the abstracts. Consider first Jennifer Stanton, "The cost of living: kidney dialysis, rationing and health economics in Britain, 1965–1996," Social Science and Medicine 49, 9, (November 1999): 1169-1182.
Paradoxically, the most effective covert rationing was achieved under the British NHS which ostensibly provides free care for all, while the uncentralised market system in the US gave way, on this issue, to almost universal state-subsidised provision. Under the British system, the most cost-effective options for renal care tended to flourish, but some patients were turned away. Physicians have been held responsible for complying with covert rationing: this paper suggests that early gearing towards socially-useful survival filtered back to selection at primary level, possibly continuing long after specialists wished to expand. Public outcry, though muted, reached parliament and caused minor shifts in policy; the main aim of the voluntary pressure campaign, to release more organs for transplant through ‘opt-out’, remained unrealised in the UK. Yet dialysis was targetted for expansion in the 1980s just at the point when health economists were presenting evidence for its low cost-effectiveness compared with other expensive interventions. According to the main strand of argument in this paper, comparisons with other countries and between regions were most influential in breaking the hold of covert rationing: policy making by embarrassment.
Intriguing. Somebody had to do the "gearing towards socially-useful survival."

Also consider David Mechanic, "Dilemmas in rationing health care services: the case for implicit rationing," BMJ Education and Debate, 1995, 310 (24 June 1995): 1655-1659.
With tension between the demand for health services and the cost of providing them, rationing is increasingly evident in all medical systems. Until recently, rationing was primarily through the ability to pay or achieved implicitly by doctors working within fixed budgets. Such forms of rationing are commonly alleged to be inequitable and inefficient and explicit rationing is advocated as more appropriate. Utilisation management in the United States and quasimarkets separating purchasing from provision in the United Kingdom are seen as ways of using resources more efficiently and are increasingly explicit. There is also advocacy to ration explicitly at the point of service.
Ration explicitly at the point of service. Somebody has to say no. Put it to a committee and do it by secret ballot, so that no one wise expert is put on the spot.
WHY PUBLIC CHOICE THEORY MATTERS. Folkbum recommends a Matt Taibbi column expressing little surprise that health insurance reform morphs into corporate welfare.
Our government doesn’t exist to protect voters from interests, it exists to protect interests from voters. The situation we have here is an angry and desperate population that at long last has voted in a majority that it believes should be able to pass a health care bill. It expects something to be done. The task of the lawmakers on the Hill, at least as they see things, is to create the appearance of having done something.
Perhaps there is an alternate universe in which wise experts pass laws in the general interest to which wise citizens submit, recognizing that the limitations being imposed on their freedom of action are for their own good and for everybody else's.

It doesn't surprise me that in this universe, citizens, wise or otherwise, act in what they perceive to be their best interest, which includes but is not limited to influencing the actions wise experts, or whoever happens to be In Authority at the moment, might take. That, as I understand things, is at the basis of enumerating and limiting the powers of government: it being understood that interests will use the government to take advantage of voters, limitations imposed on the freedom of action of the legislators is for the good of the voters, and of the legislators.
REOPEN MILWAUKEE ELECTRIC'S COLD SPRING SHOPS. There are few manufacturers of passenger train equipment in the United States. Milwaukee's Super Steel has contracts with Japanese manufacturers Sumitomo and Nippon Sharyo, and those contracts apparently will not impair Super Steel being the possible final assembler of Wisconsin's Talgo trains. (Labor-protection legislation requires Passenger Rail authorities to purchase train equipment with some share of the value added in the United States. That usually means final assembly. It's a bit more work than opening an Athearn box.)

Now comes The Political Environment, reacting to Brookfield's request for a train stop on the Madison extension. "Next stop: light rail service to link these potential high-speed rail stations so travelers don't have to drive there." Fast-rewind to 1939, when The Milwaukee Electric Railway and Transit discontinued service west of Oconomowoc. Once upon a time, that service included coach-diner cars scratchbuilt at Cold Spring Shops, admittedly not exactly light rail vehicles.

9.8.09

ADVERSE SELECTION. Taunter Media (via Folkbum) analyzes the algebra of insurance company rescissions.
Half of the insured population uses virtually no health care at all. The 80th percentile uses only $3,000 (2002 dollars, adjust a bit up for today). You have to hit the 95th percentile to get anywhere interesting, and even there you have only $11,487 in costs. It’s the 99th percentile, the people with over $35,000 of medical costs, who represent fully 22% of the entire nation’s medical costs. These people have chronic, expensive conditions. They are, to use a technical term, sick.
In that breakdown is an argument for requiring everyone to purchase health insurance. Presumably the people who opt to do without health insurance estimate that they will not use any health services, and it's likely that a meaningful share of those people bet correctly. (On the other hand, pre-existing condition is not limited to people who change jobs: per corollary to the canonical business law question about the farmer who buys wind insurance as he sees a funnel cloud to his southwest ...) So far, I'm pleased to report that other participants in the Illinois plan are benefitting from my premium payments, as befits somebody whose only award in high school was for perfect attendance.

It should be fairly clear that the people who do not file insurance claims do not face rescission. The insurance companies will happily deposit their checks. Indeed, even for someone in the 95th percentile, it doesn’t make a lot of sense for the insurance company to take the nuclear option of blowing up the policy. $11,487 in claims is less than two years’ premium; less than one if the individual has family coverage in the $12,000 price range. But that top one percent, the folks responsible for more than $35,000 of costs – sometimes far, far more – well there, ladies and gentlemen, is where the money comes in. Once an insurance company knows that Sally has breast cancer, it has already seen the goat; it knows it wants nothing to do with Sally.

If the top 5% is the absolute largest population for whom rescission would make sense, the probability of having your policy cancelled given that you have filed a claim is fully 10% (0.5% rescission/5.0% of the population).

Conditional probability is nasty stuff. Insurance companies that offer a cash settlement in exchange for a patient waiving future claims make a similar calculation, which is why the best thing to do with such an offer, assuming the rescission option isn't in a desk drawer, is to decline it.

The substitution of a government insurance policy, or the enforcement of stricter conditions on rescissions, however, does not make the underlying problem of allocating scarce resources go away. There has to be a better way to debate the issue, however, than trotting out scary stories about rescissions on one side and death panels on the other, there being a significant overlap between being in the 99th percentile of incurring health expenses and being in the 99th percentile of your cohort predeceased you.
WHO COVERS THE DEVELOPMENT COSTS? Shark and Shepherd weighs in on the government-buying-power argument advocates of nationalized health care trot out.

What the public option does is simply refuse to pay the market price. Then, one of two things happen. As do service providers with Medicare and Medicaid, the drug company may sell at the lower price to the public plan and increase its price to private plans. But, as our commenter suggests, that might not work if people migrate to the public plan in response to that and other costs shifted from the public option to private plans. The drug company, if it can, might refuse to do business with the public plan. But if it is legally required to do so or, if the public option by undercutting private plans, has become the only game in town, then it may be forced to take the lower price or withdraw the product.

In many cases, it may do the former because the cost of a drug is generally in its development and not in its production. Development costs are sunk. The company may not recoup its costs or make a "sufficient" profit at $10/pill, but it will cut its losses by selling it for that.

That's partially correct.
It's a bit more complex than that, as the health ministries can make a payment that covers more than the incremental costs of the drugs, meaning Canada is picking up some of the research and development costs.
But without sufficient incentive to incur new research and development costs, patients might ultimately be able to buy only the cheaper red pill.

We have now changed the economic environment in which new medical technology is developed. We have reduced incentives for development, so we will get less development. This creates hidden victims. We can congratulate ourselves that the $40 pill now costs $10. But we don't know who has suffered and died because the next pill was never invented. The only thing that we can be sure of is that it has happened.

This is why the "cheaper drugs in Canada" story is a canard. The problem isn't that the drug companies don't recoup their minimal marginal costs of production due to Candadian price controls. It's that they wouldn't have the same incentives for development if the whole world was Canada. In that sense, Canada's drug consumers are free riders. They enjoy what they don't pay for.

A "public option" is not the answer to unaffordable drug prices because it can't change the difficulty in developing new drugs. If we want people to have drugs that they can't pay for (and, at least for some drugs, we do), then we should help them pay for them.

Here, too, I can quibble: a drug company could assume a larger standard volume, and quote Canada and everybody else a fully-allocated-cost price which would end the free riding. On the other hand, if the Canadian price makes some contribution to the development costs, Canadian patients and investors both gain by the contract. It's too late in the evening, and a thunderstorm is too close, to get into the intricacies of Ramsey pricing. Perhaps on another day.
CALM DOWN, ALREADY. The Democrats' discomfiture at the reception their incomplete insurance reform plan, or whatever it is, produces schadenfreude.
Conservatives, myself included, have been having a lot of fun with the Democrats' dismay at people speaking their minds at townhalls or taking to the streets to protest the growth of the federal government that we've been witnessing in recent years. While I condemn any of the extremes that a handful of individuals have gone to with lynching profiles, threats of violence, or shouting down congressmen and preventing them from answering questions, there still is a lot of irony in those people who praised community organizers a few months ago now getting their panties in a wad about senior citizens showing up to complain about the Democrats' health care plans.
As ever, it matters more whether logic and content will carry the day, or if it's going to be just another round of "You compared us to Nazis first."
In America, the darkness is descending and torches are being lit. Fear stalks the land - fear of the unknown, fear of our fellow citizens, fear of our political leaders, fear of the future. This fear is being stoked on both sides by people who are well aware of the consequences of what they are doing, but continue to fan the flames of dread because it gives them power and influence, or furthers their political designs. Reason has left the building. It has been replaced by a raw emotionalism that feeds upon itself, spiraling out of control, threatening violence and disorder while making any rational debate about health care reform impossible.
Many years ago, I took issue with one of the educational reformers of the time, who saw merit in deconstructing "coherent beliefs of any kind." My response: enjoy the incoherence. Happy now?

8.8.09

NEW DEALERS MUGGED BY REALITY. There's accumulating evidence that the technocratic policies begun during the Hoover administration and expanded by the Roosevelt administration deepened, or, at best, failed to ameliorate, the Great Depression. Amity Shlaes's The Forgotten Man: A New History of the Great Depression, will provide background for that evidence, without providing the statistical or economic analysis itself. Thus for a short Book Review No. 29: more than a few of the technocrats visited the Soviet Union in the 1920s only to revise their impressions of that technocratic nightmare later; more than a few of the people demonized by the Administration (the enemies list, or "they bring a knife, we bring a gun" are for the future) come off as sympathetic characters, and Wendell Willkie emerges as sympathizer-turned-skeptic. The forgotten man of the title is the individual who must contribute to the efforts of the government to do well by somebody else. In Randian terms, one could substitute Blank-out. For all of that, the focus is on principal actors, and there is, in common with many of the Civil War histories, an appendix with what-happened-after-1940 stories for those actors.

(Cross-posted to 50 Book Challenge.)
LOCAL COLOR. Representative Don Manzullo, a Republican from the Sixteenth District, held a town meeting in Sycamore.

Manzullo pointed out some of the major problems he sees in the [health care] bill. Those include new bureacracies created, more entitlement programs and the high use of taxes and penalties.

He cited a report that the unemployment rate would rise because small businesses would be put out of business. Faced with penalties, they would be forced to buy into it, he said.

Manzullo said he has spent 60 hours reading the bill and is halfway finished reading the 1,000-page-plus document.

His solution to health care reform is to continue improving what's already being done, such as health savings accounts and refundable tax credits for low-income people to purchase health insurance.

As far as I know, there were no Nazis, paid Republican agitators, or Democratic thugs present, although the news accounts suggest a frank and open exchange of views, with no outbreaks of verbal terrorism.

It's quite likely that anybody at this meeting wearing a DeKalb seed cap was doing so with no symbolism in mind. They're available around here if you know where to look.
TONIGHT'S PASSENGER RAILROAD DEVELOPMENTS. Trains for America found a WTTW Chicago Tonight report on recent developments in high-speed rail.



The opening footage of the story shows the 1937 Hiawatha (look closely at the Tip Top Tap car behind the One-Spot). The main body features interviews with assorted public officials and dissenters.

Closer to home, Genoa City Administrator Joe Misurelli is drawing Thunen rings.

On Misurelli’s map, the circles are drawn in a radius of 10 and 12 miles around one of the two proposed stops in Rockford – the route will include two Rockford stops no matter which route is chosen – and the other is around the proposed Genoa and Belvidere stations.

The circle around the Belvidere stop overlaps the Rockford stop by about half – meaning people in communities like Cherry Valley and Irene are within 10 miles of both stations.

But when the second circle is centered over Genoa, residents from Genoa, Kingston, Kirkland, Hampshire, Burlington, Sycamore, DeKalb and Cortland are all within 10 miles of an Amtrak station. None of those communities is within 10 miles of the Belvidere station.

When the center of the circle is moved from Belvidere to Genoa, the only community that loses its 10-mile link to Amtrak is Poplar Grove – a town with a population of less than 2,000. The Belvidere route means that DeKalb, a city of nearly 50,000 people, would be more than 25 miles from an Amtrak station while residents of Timberlane, population 735, will have a choice of three nearby stations.

Having the line come through Genoa would fully serve Rockford and Belvidere, Misurelli said, while also picking up Sycamore, DeKalb and Northern Illinois University.

One train a day, morning-eastward, evening-outward, is unlikely to be much help for Northern Illinois University traffic. The Genoa Chamber of Commerce has created a domain called Blackhawk Express Direct Route to make the case for the routing via Genoa, the line that hosted Amtrak's Black Hawk until 1982 and at one time featured the Land O'Corn and the Hawkeye to points further west.

As far as Northern Illinois University is concerned, the Direct Route is the Overland Route. That, however, is not a serious option for a train aimed at the North West Frontier.

The wrangling over routing is necessary, although it's likely to delay startups for either the Dubuque service or the Madison service.
GOOD NEWS, BAD NEWS. No evidence of clouted admissions at Northern Illinois.

Northern Illinois University officials said Friday that they have found no evidence that former Gov. Rod Blagojevich or any of his friends used political clout to help gain admission for certain students.

NIU is one of three state universities – along with the University of Illinois system and Southern Illinois University – that was subpoenaed in June by the U.S. attorney’s office, which was seeking records to determine whether the former governor improperly exercised clout in admitting favored students.

A commenter to the article gripes, "Please, this is such a non-story. There are so many programs to get somebody undeserving into NIU if they needed help, there really was a problem." That's one possibility: another possibility is that state officials intuit on some level the deleterious effects of the mis-named Priorities, Quality, and Productivity initiative and its successors, which has affected all of the state's universities, but perhaps the politically favored ones in Urbana and Carbondale less so.
THE WORLD I HAD TO COME OF AGE IN. Helter Skelter. Woodstock. Such marvelous preparation for junior year of high school.

7.8.09

LEGO IMAGE OF THE DAY.


BUILD THE STATIONS WHERE THE PASSENGERS ARE. Brookfield, an upscale suburb in automotive-addicted Waukesha County, wants an Amtrak stop.
The proposed station would be located in the Village Area along Brookfield Road near River Road. Construction costs, which would be covered by federal stimulus funds, would include a new station, a 300-plus-stall parking lot and train platforms, said Dan Ertl, the city's director of community development.
The old station, at the west end of the split-grade line out of Milwaukee, still stands.

In Madison, an organization called Dane Alliance for Rational Transportation suggests a station in the wye connecting the Watertown Sub with the Portage Sub to set passengers down closer to Capitol Hill and the University. The station is not as close to the capitol as the Alton gets in Springfield or to the University as the Illinois Central gets in Champaign, but it is a lot closer than the station at the airport. The proposal is for a station on a curve, which is less of a problem with a fixed-formation train, at a location where a signal to allow the train onto the Portage Sub might be restrictive, but it envisions a relatively short platform. There's more conversation about this proposal at Trains for America.

The recession has reduced ridership on the existing Hiawathas.
In recent years, Hiawatha ridership nearly doubled, from 397,518 in 2002 to 766,167 last year, with a 24% jump in 2008 alone. That 93% ridership boost wasn't enough to convince the Legislature to authorize an eighth daily round trip in the 2009-'11 state budget, but it seemed to bolster the administration's case for buying the two Talgo train sets, which will increase capacity from 350 to 420 passengers on each trip.
I'm worried about Wisconsin repeating the McGinnis mistake of buying relatively spartan trains.

To help attract riders, the Talgo trains will offer amenities the Hiawatha doesn't have now, [Ron] Adams [of the Wisconsin Department of Transportation] said. Seating will be "first-class for everyone," with wider, more comfortable seats and more leg room, he said.

State officials also want to provide Wi-Fi service on the new trains, Adams said. Other improvements, such as bicycle racks, are still under study, he said. Baggage space will be similar to current trains, and the state doesn't plan to add café cars, he said.

[Republican state senator from River Hills Roberta] Darling remains skeptical.

"People love the Amtrak, they just love the Hiawatha, but I have never heard them demanding that we upgrade the trains so they will ride them," Darling said.

State officials have said the Talgo trains' lightweight construction and tilt-train technology - which lets them take sharp curves at high speeds - would be advantages for 110-mph service on the Milwaukee-to-Madison line and for a planned upgrade to high-speed service all the way from Chicago to Minneapolis-St. Paul.

There's still a lot of work to do to get back to what was routine once. Bear in mind that an eight-coach traditional Hiawatha (.pdf) offered 420 "wider, more comfortable seats and more leg room" ahead of the Super Dome, which had a tap lounge in the bomb bay, and the Super Dome was marshalled ahead of the dining car and at least one parlor car with genuine first-class seating behind the diner. For busy periods, the coach yard could cut in another coach or two.
CHICAGO, CHICAGO. A special panel investigates the candy store in Urbana.

To start, the Illinois Admissions Review Commission urged the university's trustees to resign and had harsh words for the top administrators -- President B. Joseph White and Chancellor Richard Herman -- for acting unethically by enabling an admissions process that allowed subpar students sponsored by powerful people to get into the state's most prestigious public campus.

"The University now finds itself in a full-fledged crisis purely of its own making," the report states. "Public confidence in the University and its leadership has eroded, and the University must set out in earnest to regain the public's trust and repair the damage done to its reputation."

One can generalize the report either to consider the deleterious effect generally of preferential admissions, or to contemplate the pervasiveness of influence trading in Illinois.

Preferences first.

The findings come in the wake of a Chicago Tribune investigation that found more than 800 undergraduate applicants received preferential treatment over the last five years because of their connections to elected officials, generous donors or university trustees. Dozens more benefited from special consideration at the law school and other programs. While it is unknown how many patronage applicants would have gotten in on their own, their acceptance rate is higher than for the entire applicant pool even though they had lower average ACT scores and class ranks, records show.

"The admission of substandard applicants resulted in other, more qualified applicants being denied admission," according to the findings, reached after reviewing about 9,000 pages of documents and hearing more than 40 hours of testimony from dozens of people.

The panel refuted the contention that U. of I. acted no differently than every other selective university, a point argued by White after the Tribune revealed the preferential treatment.

"Over time, a process that may have begun as a seemingly innocuous way to 'track' inquiries from prominent individuals evolved (or devolved) into a 'well-oiled' machine that was perhaps unparalleled among universities in its level of formality and structure," it wrote.

"The admission of substandard applicants resulted in other, more qualified applicants being denied admission." The generalization to legacy admissions and to affirmative action as practiced is straightforward.

The same print edition of the Chicago Tribune that carried this story also carried a story about clout admissions at Chicago's best public high schools.

Federal investigators are trying to determine whether public officials clouted students into Chicago's highly competitive selective enrollment high schools, according to a subpoena the Tribune obtained Thursday.

The July 21 federal grand jury subpoena seeks documents related to how applicants were admitted to the city's nine elite public high schools through a process that allows principals to handpick 5 percent of students.

Prosecutors want city school leaders to turn over correspondence related to the principal selection process, including who applied, who was accepted, what public officials weighed in, as well as test scores, evaluations and recommendations.

Federal investigators also are seeking all policies and guidelines that principals are supposed to use to pick students and an "organizational chart for the central office of the Chicago Board of Education."

The investigation has just begun. Our President will not be named in this investigation as a parent: his children attended the University of Chicago's Laboratory School in Hyde Park, where the black and the white stand shoulder to shoulder against the poor. His role as community organizer is yet to be determined.

Favors for favors, however, are just another day at the office in the Chicago Public Schools.

Earlier this year, [developer Michael] Scott's roles as school board president and as a member of the city's Olympic committee stirred controversy.

In May, he asked all of the city's school principals to form plans to promote the Olympics. Teachers and union officials said Scott's tactics were heavy-handed and they feared retaliation if they did not support [Chicago nmayor Richard] Daley's quest for the Games.

Daley first floated his vision of bringing the Olympics to Chicago in 2005 after previously dismissing the idea as too costly. He assembled an exploratory committee in mid-2006 that included Scott.

Mr Scott then went on to make some strategic land purchases.

Developer Michael Scott Sr., an early member of the mayor's Olympic committee, leads a group planning a residential and commercial project on lots kitty-corner from the proposed Douglas Park sporting venues, a location where land values could jump if the city gets the Olympics.

The plan -- which would include a Nike store -- already has gotten crucial support from the local alderman, who has set aside the lots for Scott and his group.

The city generally sells taxpayer-owned lots for $1 apiece for affordable housing projects, and in other cases negotiates land prices.

The article does not explain how the city came to own the land, whether by sale for delinquent taxes or by eminent domain.