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Identifying Sources of Cost Disease

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Re: Identifying Sources of Cost Disease

#21

Post by taneq »

Jabanga wrote: post #16
js8 wrote: post #15

I think the problem is that the neoclassical theory of perfect competition is just flatly wrong, and markets actually tend to monopoly (oligopoly) pricing over time. (So the "perfect competition" is more an exception than a rule in the real world.) There is plenty evidence for this, see e.g. Keen & Standish: http://www.albany.edu/~gs149266/Keen%20&%20Standish%20(2006)... One simple way to see this, really, is to cons…

>And health care and education are matter of life and death for most people, so yeah, high prices Food is also a matter of life and death. The difference between food and healthcare/education is that the former is not as heavily subsidised as the latter. >And health care and education are matter of life and death for most people, so yeah, high prices, unless there is a big factor that will put an end to that (which h…

> Food is also a matter of life and death.

And we have a pretty well established cultural understanding that you don't let people starve, no matter how poor they are. And yet somehow the equivalent understanding that you don't let people die of preventable diseases, no matter how poor they are, is somehow controversial.

Re: Identifying Sources of Cost Disease

#22

Post by taneq »

Jabanga wrote: post #20
js8 wrote: post #18

Earlier quoted context omitted.

> Food is also a matter of life and death. I think that's because you can grow your own food, and you can also buy it from abroad. Not so much with health care or education (because it's a service, not a physical product). So you can be (at least in the U.S.) screwed less over food than over health care. I agree that I don't have a complete picture, but at least, people should consider evidence for this theory. > The…

>The problem is, the economies that have strong government actor working on behalf of consumers (either in the form of regulation, or a public corporation that competes in the market too) are actually affected less. I don't see any evidence for that. A couple counter-examples: Singapore and developing countries like India and China have more market based healthcare systems than Western Europe and the US, and spend fa…

> A couple counter-examples: Singapore and developing countries like India and China have more market based healthcare systems than Western Europe and the US, and spend far less on healthcare as a percentage of GDP.

I think this is far more to do with the fact that they're developing countries than the economic structure of their healthcare systems.

Re: Identifying Sources of Cost Disease

#23

Post by kevinr »

kvb wrote: post #9
kevinr wrote: post #7

Serious question: do any reputable economists besides Tyler Cowen believe in cost disease?

I think most do... Can you point to some that don't?

It is, unfortunately, impossible to prove a negative, not that that's ever stopped anyone from trying. For example, though, a cursory Google turns up no instances of Paul Krugman or Larry Summers mentioning it, which I would expect for something which "most economists" understood to exist.

Re: Identifying Sources of Cost Disease

#24

Post by Jabanga »

taneq wrote: post #21
Jabanga wrote: post #16

Earlier quoted context omitted.

>And health care and education are matter of life and death for most people, so yeah, high prices Food is also a matter of life and death. The difference between food and healthcare/education is that the former is not as heavily subsidised as the latter. >And health care and education are matter of life and death for most people, so yeah, high prices, unless there is a big factor that will put an end to that (which h…

> Food is also a matter of life and death. And we have a pretty well established cultural understanding that you don't let people starve, no matter how poor they are. And yet somehow the equivalent understanding that you don't let people die of preventable diseases, no matter how poor they are, is somehow controversial.

It's not the preventable diseases that are the most costly to treat. But regardless of semantics, I know what you mean. The reason is that the consequences of guaranteeing everyone enough food are different than the consequences of guaranteeing everyone top-of-the-line (i.e. doing everything we can to keep sick people alive) healthcare.

Food has become so cheap that almost everyone can afford enough to eat without direct subsidies (e.g. indirect subsidies, like welfare payments, are enough). So such an understanding doesn't result in the creation of pervasive government programs that utterly dominate the market for food and inflict it with the cost disease.

Re: Identifying Sources of Cost Disease

#25

Post by redy »

Jabanga wrote: post #20
js8 wrote: post #18

Earlier quoted context omitted.

> Food is also a matter of life and death. I think that's because you can grow your own food, and you can also buy it from abroad. Not so much with health care or education (because it's a service, not a physical product). So you can be (at least in the U.S.) screwed less over food than over health care. I agree that I don't have a complete picture, but at least, people should consider evidence for this theory. > The…

>The problem is, the economies that have strong government actor working on behalf of consumers (either in the form of regulation, or a public corporation that competes in the market too) are actually affected less. I don't see any evidence for that. A couple counter-examples: Singapore and developing countries like India and China have more market based healthcare systems than Western Europe and the US, and spend fa…

It's also worth noting Singapore is certainly not a market-based system. Singapore's healtcare efficiency is completely the result of mandatory saving programs, a government funded insurance scheme for the poor and strict price controls[1].

As for China frankly I don't think anybody would seriously want to replicate what passed for healthcare in China. It's disturbingly common for patients to die because they cannot afford even routine surgeries in China.

[1] https://en.wikipedia.org/wiki/Healthcare_in_Singapore#Fundin...

Re: Identifying Sources of Cost Disease

#26

Post by Jabanga »

taneq wrote: post #22
Jabanga wrote: post #20

Earlier quoted context omitted.

>The problem is, the economies that have strong government actor working on behalf of consumers (either in the form of regulation, or a public corporation that competes in the market too) are actually affected less. I don't see any evidence for that. A couple counter-examples: Singapore and developing countries like India and China have more market based healthcare systems than Western Europe and the US, and spend fa…

> A couple counter-examples: Singapore and developing countries like India and China have more market based healthcare systems than Western Europe and the US, and spend far less on healthcare as a percentage of GDP. I think this is far more to do with the fact that they're developing countries than the economic structure of their healthcare systems.

I mention that possibility in the very next sentence and also point out that Singapore has a higher life expectancy than EU countries.

Re: Identifying Sources of Cost Disease

#27

Post by Jabanga »

redy wrote: post #13
kevinr wrote: post #7

Serious question: do any reputable economists besides Tyler Cowen believe in cost disease?

Cost disease is definitely a real thing but you should be very wary of the diagnoses proposed by these amateur (libertarian) bloggers. Even a cursory analysis reveals that attempts to blame regulation, utilization, or government spending do not hold water -- all you have to do is compare the US to France, Germany and Japan. A more plausible theory is that cost disease is largely due to (1) regulatory capture and weak…

>France, Japan, China -- these are in fact highly centralized economies which means that they are able to operate national, robust healthcare and military systems with surprising efficiency.

France and Japan are suffering from the cost disease. China's healthcare system is more private than the US system. It's also pretty primitive at the moment so not a great point of comparison.

I think your cursory analysis is sloppy.

>amateur (libertarian) bloggers

Ah the irony..

Re: Identifying Sources of Cost Disease

#28

Post by redy »

panarky wrote: post #19
redy wrote: post #13

Earlier quoted context omitted.

Cost disease is definitely a real thing but you should be very wary of the diagnoses proposed by these amateur (libertarian) bloggers. Even a cursory analysis reveals that attempts to blame regulation, utilization, or government spending do not hold water -- all you have to do is compare the US to France, Germany and Japan. A more plausible theory is that cost disease is largely due to (1) regulatory capture and weak…

> attempts to blame regulation, utilization, or government spending do not hold water Agreed. These amateur ideologues latch onto anything that seems to support their beliefs with very little hard thinking. > ultimately boils down to corruption ... highly decentralized and federalized economies Maybe, but Western nations are arguably more centralized today compared to 50 years ago. 70 years ago the US won a world war…

> 60 years ago the US built the interstate highway system.

I think this is the point. The US spent roughly half a trillion dollars to build ~40,000 miles of road. There was a great deal of corruption as well as massive political conflict between federal, state and city agencies. Compare this to what the Nazis did in 1935 when the government hired 150,000 men and put them to work and finished construction five years later.

The point here isn't that decentralization is bad. But it's not difficult to see why these large federalized states like the US, India, Brazil do infrastructure so poorly.

> What's changed in the last 5 or 6 decades?

The rise of highly sophisticated private actors that are, in fact, very, very good at extracting public monies. This is most visible in the military where the cost of outsourcing is so obscene that even Congress cannot deny it and now "in-sourcing" is a thing -- but really it afflicts almost everything the government does. This combination of decentralized, unsophisticated, weak government actors trying to match wits with highly sophisticated, numerate private actors is, in the end, a recipe for pillaging of the public treasury. (In fact one could argue that the 2008 global financial crisis is ultimately the best example of such pillaging.)

Another way to look at this is to understand that what people call "cost disease" is the other side of the growing pricing power of private firms. And, ultimately, these firms can charge such high prices because they have worked very hard to guarantee that governments will pay them. (See eg Medicare where by law the program cannot negotiate prices.)

Re: Identifying Sources of Cost Disease

#29

Post by Aron »

calafrax wrote: post #6

Very interesting observations and a very complex subject with many factors. One theory of economics is that it only actually works if very few of the market participants act like rational economic actors. In the example of higher education, for instance, universities used to be a great value for students. Now they are approaching break-even on average in terms of cost-benefit for students, with some students losing a…

A break-even cost-benefit is not a market based outcome.
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