Thursday, April 29, 2010

Mark Zuckerberg's feelings about privacy

Facebook CEO Mark Zuckerberg appears to have been outed as not caring one whit about your privacy — a jarring admission, considering how much of our personal data Facebook owns, not to mention its plans to become the web’s central repository for our preferences and predilections.

Also interesting is how this came about: Not in a proper article, but in a tweet by Nick Bilton, lead technology blogger for the The New York Times‘ Bits Blog, based on a conversation he says was “off the record” and which he may have confused with “not for attribution.”--Eliot Van Buskirk, Wired, on why Facebook keeps on pushing you on privacy

Tuesday, April 27, 2010

Compensating differentials for status

Economic theory holds that in competitive labor markets, workers are paid the market value of what they produce. In actual markets, pay does rise with productivity, but not by much. The most productive carpenter in a framing crew, for example, might produce twice as much as his least productive colleague, but is rarely paid even 30 percent more. ...

If the most productive workers in a group are paid less than the value of what they produce, why don’t rival employers just lure them all away?

One answer is that these employees may care, often subconsciously, about things besides pay. The most productive workers in a group, for example, often appear to value their status, perhaps because they enjoy greater self-esteem and respect than the least productive workers. To bid successfully for the high achievers, a rival employer might not only have to increase their pay, but also place them in a group where they continue to enjoy a high ranking.

In a free market, however, no one can be in the top half of any group unless others agree to be in the bottom half. And if people prefer not to occupy low-ranking positions, filling these positions would require extra compensation. The rival’s offer, then, would resemble the original pay pattern.

The upshot is that top-ranked workers may well stay put. The high ranking they enjoy is more than enough to offset their sacrifice in pay. Similarly, their less productive co-workers may find it onerous to be at the bottom of the ladder, but they are compensated for that fact by their premium wages.
--Robert Frank, NYT, on why wages are compressed within organizations

Don't count on a German bailout of Greece

If Germany can’t be sure that Greece will avoid default, it would be much better off simply letting Greece go its own way, and then bailing out its domestic banks if Greek did end up defaulting. The cost of the bank bailout would be lower than the cost of a Greece bailout, and the money would remain within Germany.
--Felix Salmon, Reuters, on why German self-interest won't necessarily save Greece. HT: Marginal Revolution

Monday, April 26, 2010

Harvard sheepishness

Finally, and this is what I think prompted my non-misplaced roommate’s reaction, her appalled disbelief, the ritual—the submission [to the Harvard College Fifth Anniversary Report], the reunion itself—seemed so very Harvard. And Harvard-ness is something we members of an irony-steeped generation (or my irony-steeped friends; it’s probably not fair to generalize) have always struggled with. In college, we went to formals, but in thrift-store fancy dress; at graduation we drank “Harvards” (Angostura bitters, brandy, grenadine for the crimson, sweet vermouth, lemon juice—thanks, Playboy Bar Book!) with the same kind of winking observance and defiance of ritual. It was only subtly different than actually observing the ritual, and perhaps the distinction was discernable only to us; but it felt, still feels, like an important one. No, we weren’t really being the elite, there in our dark-paneled, Oriental rug-ed library, there in our common room before our fireplace with its plug-in log. Instead, we were rolling our eyes at the notion of being that elite. I understand better now than I did then how grating our refusal to own up to the privileges we’d been granted may have been to an outsider, but it was how we defined ourselves then: we were of Harvard but not, you know, of of it. And that distinction seemed impossible to establish in the context of the reunion. By registering, by attending, you forwent any kind of insouciance. You would be caught trying, for real.
--Phoebe Kosman (Harvard College '05), Harvard Magazine, on other manifestations of the mentality that made us say, "I go to school in Boston"

The Facebook privacy treadmill

It's almost become a joke: Facebook makes a change to its privacy settings that opts you in to a bunch of scary stuff, the entire Internet flips out about it, it rolls back the change, and then a few months or years later, it makes the same or a very similar update, opting you in to it again. It would be funny, if it weren't getting so damned insulting. ...

Among other things, Facebook this week announced new "personalization" changes--the stickiest of them being Instant Personalization, which shares all your publicly available information (name, profile picture, gender, and "Connections," another new way for you to publicize all the things you're interested in) with, right now, three partner sites: Yelp, Pandora, and Docs.com. It's sticky because, as with most of Facebook's annoying new features, it's opt-out.

Instant Personalization also shares your list of friends, as well as those friends' public information, with these partner sites. And again: you have to opt out of this feature, and even if you do, your public information will still be shared, if your friends remain opted in. The only way to stop that from happening, according to Facebook's fine print, is to actually block the application entirely. ...

Now, there does seem to be an answer in Facebook's byzantine maze of privacy settings, under the heading, "What your friends can share about you." This lets you control what applications and Web sites can learn about you from your friends. It's unclear how this might affect "Instant Personalization" (see how that pattern of confusion and obfuscation just rolls on?), but wow, hey, look at all the things that are prechecked here!


It's almost quaint that Facebook didn't precheck my relationship status or religious views. So, you're telling me that "Instant Personalization" aside, my friends could be sharing nearly everything I put in my profile or on my wall or anywhere else with any application or Web site they use? Huh. Good to know. ...

Most users, minus those who now predictably freak out about privacy with every little change, will probably ignore their new settings or--and this is just so nefarious and sleazy--make a change that's essentially useless (like opting out of Instant Personalization without blocking applications or even spotting the screen that says your friends are still busy sharing everything you're "protecting"). ...

There's nothing wrong with making a little money. Heck, there's nothing wrong with making a lot of money. But you should not, Facebook, get to make that money by tricking me into making personal information public, by creating an increasingly baffling web of privacy-violating loopholes, and by opting me in to every new moneymaking scheme you come up with. That's how you lose user trust, and losing user trust is how you lose users.
--Molly Woods, CNET, on the power of profitable defaults and deception

Thursday, April 22, 2010

The greatness of Bach

On one stave, for a small instrument, the man writes a whole world of the deepest thoughts and most powerful feelings. If I imagined that I could have created, even conceived the piece, I am quite certain that the excess of excitement and earth-shattering experience would have driven me out of my mind.
--Johannes Brahms to Clara Schumann on Bach's Chaconne for solo violin

Conflicts of interest in the NFL players' union

In 1968, the Washington Redskins used their first-round pick (12th overall) on [James] Smith, an All-American defensive back from the University of Oregon. The rookie signed with the team for $50,000, and his unremarkable first season culminated in a career-ending neck injury during Week 14. Smith seemed destined for quick obscurity. Then he sued the NFL.

Two years after his retirement, Smith went before a judge and asserted that the draft constituted an unreasonable restraint of trade in violation of the Sherman Antitrust Act. Had it not been for the draft, he argued, he would have been able to negotiate a more lucrative contract for his one year as a professional. And he demanded that the NFL make up the difference.

The case succeeded at the district court, securing $276,000 in treble damages for Smith, and he won again when the league appealed. In 1977, the U.S. Court of Appeals for the District of Columbia Circuit ruled the "draft inescapably forces each seller of football services to deal with one, and only one buyer, robbing the seller, as in any monopsonistic market, of any real bargaining power." ...

But league lawyers (including future Commissioner Paul Tagliabue) had already been working on a Plan B. ... [L]eagues could still hold their drafts as long as they could get the unions to agree to them. ...

For the last three decades, the blessing of the players union has ensured the legality of this [draft] arrangement. But that doesn't mean the system is fair or equitable. In fact, the players association doesn't really have an incentive to protect the interests of future professionals.

The union's leadership is determined by seniority, with the upper echelon composed of veterans whose financial stakes conflict with those of the rookies. ... It benefits the veteran players who run the union to keep that pool [of money for rookie salaries] small. ...

In fact, there's buzz that in the next agreement, the union will accept an even tighter wage scale for rookies. ...

[T]those who wish to challenge the NFL draft in the post-Yazoo Smith era should think hard about their target. It's not the league. It's the union.
--Eriq Garner, Slate, on who the NFL draft serves

Wednesday, April 21, 2010

The difference between Harvard and Yale grads

As graduates of Ivy League colleges prepare en masse to descend on Manhattan for summer internships, it is worth noting the special quirks of the Yalie—the Yalien—a foreign creature characterized by a set of elusive, contradictory traits that separate him from everyone else clawing for power in this city. ...

There is a notion among Yaliens—the nonnative New Yorkers among them, at least—that the city is owned by them. They covet ownership of it when they arrive, eyeing with frustrated envy the graduates of Columbia and N.Y.U. in their midst who have already been here for four years.

“They’ll throw around names of places in a way Harvard kids don’t,” one Columbia student complained. “They’ll say, ‘I’m at Botanica,’ even if they don’t know if you, someone who goes to school here, know what Botanica is, whereas I think Harvard kids would say, ‘I’m at a bar in Soho. It’s called Botanica.’” ...

Yaliens would like to think that Harvard represents everything they are not: careerist, square, preoccupied with frivolous matters and spurred on by dull, bourgeois ambitions. There is a sense among Yaliens that it is crass to go to Harvard, and that the people most at home there are sheltered and uninspired.

“Yalies compete with each other by trying to do more interesting and creative and unusual things, whereas Harvard people try to compete with each other in a more conventional way, by getting farther, faster in their careers,” said [Jacob] Weisberg. “Harvard people try to be more, and Yale people try to be different. The way to impress your Yale coterie is not to make partner at an early age or to run something at an early age—it’s sort of to invent a job or just do something really cool and hopefully socially conscious.”

At Harvard, [Richard] Bradley added, “you’re basically going to school at a mall—a place that doesn’t want to admit it’s a mall.” ...

Perhaps the most important thing to remember about Yaliens is that they really love Yale. They loved being there and although they don’t brag about having gone there the way Brown grads do, they are not sheepish about it the way Harvard grads always are. Despite being self-consciously idiosyncratic, Yaliens feel a loyalty toward their school more sincere than anyone else in the Ivy League, and identify with one another deeply even as they seek to project an aura of independence. ...

“It's my sense that at other schools—like Harvard, N.Y.U., Stanford, M.I.T.—you’re very much focused on how you’re gonna use it to get to the next place,” said Nathaniel Rich, an outgoing Paris Review editor who graduated from Yale in 2002. “I love New Haven, but...it forces people’s energies inside instead of outside.”

“There’s something very parochial about [Yale people’s] interest in Yale and Yale institutions, which you find everywhere, I guess," said Christopher Glazek, a 25-year-old New Yorker fact checker who graduated from Yale in 2007, "but at Harvard, it seems outwardly directed. The Lampoon is a big deal because it has a stranglehold on a really existing professional world. You couldn’t say that about any Yale institution.” ...

“They’re all exceptionally nice—Harvard people are not usually that nice,” said Ira Stoll, the Harvard ’94 grad who hired many Yale students as interns when he was editor of The New York Sun. “I have one Yale friend who’s always bringing homemade cookies here to my house. Another one went out of his way to buy a lot of copies of my Samuel Adams book. If a Harvard person did that, you’d think it was because they wanted something from you. But, the Yale people—it’s like, they’re a little earnest.”
--Leon Neyfakh (Harvard '07), New York Observer, on Yaliens and Harvardians in our midst

Monday, April 19, 2010

The might of nature



Lightning above the Eyjafjallajökull volcano eruption. For more info, see here

China is boring

[Li Yufei] writes a blog, downloads Korean television shows, manages two Web sites devoted to music and plays an online game called Rongguang Hospital, at Baidu.com.

“I started doing a lot of this when I was about 11 years old,” says Mr. Li, a freshman at the Shanghai Maritime University. “Now, I spend most of my leisure time on the Internet,” he says. “There’s nowhere else to go.”

Google’s decision last month to remove some of its operations from China has overshadowed a startling dynamic at work in this country, a place where young people complain that there is not a lot to do: the Internet, already a potent social force here, has become the country’s prime entertainment service.
--David Barboza, NYT, on there being nothing to do in Shanghai

Saturday, April 17, 2010

360-degree feedback

Sent: Tuesday, February 9, 2010 7:15:11 PM GMT -08:00 US/Canada Pacific
Subject: Brand Strategy Feedback

Prof. Galloway,

I would like to discuss a matter with you that bothered me. Yesterday evening I entered your 6pm Brand Strategy class approximately 1 hour late. As I entered the room, you quickly dismissed me, saying that I would need to leave and come back to the next class. After speaking with several students who are taking your class, they explained that you have a policy stating that students who arrive more than 15 minutes late will not be admitted to class.

As of yesterday evening, I was interested in three different Monday night classes that all occurred simultaneously. In order to decide which class to select, my plan for the evening was to sample all three and see which one I like most. Since I had never taken your class, I was unaware of your class policy. I was disappointed that you dismissed me from class considering (1) there is no way I could have been aware of your policy and (2) considering that it was the first day of evening classes and I arrived 1 hour late (not a few minutes), it was more probable that my tardiness was due to my desire to sample different classes rather than sheer complacency.

I have already registered for another class but I just wanted to be open and provide my opinion on the matter.

Regards,
xxxx


xxxx
MBA 2010 Candidate
NYU Stern School of Business
xxxx.nyu.edu
xxx-xxx-xxxx

The Reply:

—— Forwarded Message ——-
From: scott@stern.nyu.edu
To: "xxxx"
Sent: Tuesday, February 9, 2010 9:34:02 PM GMT -08:00 US/Canada Pacific
Subject: Re: Brand Strategy Feedback

xxxx:

Thanks for the feedback. I, too, would like to offer some feedback.

Just so I've got this straight...you started in one class, left 15-20 minutes into it (stood up, walked out mid-lecture), went to another class (walked in 20 minutes late), left that class (again, presumably, in the middle of the lecture), and then came to my class. At that point (walking in an hour late) I asked you to come to the next class which "bothered" you.

Correct?

You state that, having not taken my class, it would be impossible to know our policy of not allowing people to walk in an hour late. Most risk analysis offers that in the face of substantial uncertainty, you opt for the more conservative path or hedge your bet (e.g., do not show up an hour late until you know the professor has an explicit policy for tolerating disrespectful behavior, check with the TA before class, etc.). I hope the lottery winner that is your recently crowned Monday evening Professor is teaching Judgement and Decision Making or Critical Thinking.

In addition, your logic effectively means you cannot be held accountable for any code of conduct before taking a class. For the record, we also have no stated policy against bursting into show tunes in the middle of class, urinating on desks or taking that revolutionary hair removal system for a spin. However, xxxx, there is a baseline level of decorum (i.e., manners) that we expect of grown men and women who the admissions department have deemed tomorrow's business leaders.

xxxx, let me be more serious for a moment. I do not know you, will not know you and have no real affinity or animosity for you. You are an anonymous student who is now regretting the send button on his laptop. It's with this context I hope you register pause...REAL pause xxxx and take to heart what I am about to tell you:

xxxx, get your s*** together.

Getting a good job, working long hours, keeping your skills relevant, navigating the politics of an organization, finding a live/work balance...these are all really hard, xxxx. In contrast, respecting institutions, having manners, demonstrating a level of humility...these are all (relatively) easy. Get the easy stuff right xxxx. In and of themselves they will not make you successful. However, not possessing them will hold you back and you will not achieve your potential which, by virtue of you being admitted to Stern, you must have in spades. It's not too late xxxx...

Again, thanks for the feedback.

Professor Galloway
--Deadspin.com quoting sentiments that I, of course, never ever ever feel towards students

Friday, April 16, 2010

Another signal bites the dust

To increase the appeal of the already popular Computer Science 50, Harvard’s introduction to computer science, course instructor David J. Malan ’99 announced yesterday that starting next fall, all students will be graded on a satisfactory/unsatisfactory basis.

Malan, who first started teaching CS50 in the fall of 2007, said that he had long considered eliminating letter grades to encourage more students without previous programming experience to take the course.

Given the course’s reputation for time-consuming problem sets, Malan said he often worries that interested students may shy away from taking the course, though 72 percent of students who took CS50 last semester said they had no programming experience.
--Monica Dodge, Harvard Crimson, on the impending elimination of a useful signal of ability I've often used in hiring decisions


If I’m going to put all that effort, I want the grade to sit on my transcript, I don’t want a satisfactory—if I put in the work for an A.
--Marina Anton expressing the Harvard attitude I know and love

UPDATE:
Less than two weeks after announcing to the Computer Science 50 course staff that the class would be offered satisfactory/unsatisfactory next fall, course instructor David J. Malan ’99 wrote in an e-mail to teaching fellows and course assistants Saturday night that “sufficiently many concerns have arisen” such that “SAT/UNSAT will not happen this fall after all.”
--Gautam Kumar and Evan Rosenman, Crimson, on the resuscitation of the signal

Thursday, April 15, 2010

When the best and the brightest aren't enough

A charter school created and overseen by Stanford University’s School of Education was denied an extension of its charter on Wednesday night after several members of the school board labeled it a failure.

Last month the state placed the charter school, Stanford New School, on its list of persistently lowest-achieving schools. ...

“We’re all in shock,” said Deborah Stipek, dean of the Stanford School of Education and president of the charter school’s board. Starting a new school, Dr. Stipek said, “takes time.”

Yet despite the support of some of the nation’s finest educators, the benefits that a great university can provide and spending $3,000 per student above the state average, Stanford New School was not able to become the national model that the School of Education set out to create in 2001 when it opened its first charter institution. ...

But Stanford New School has the best of credentials. It was founded by Linda Darling-Hammond, a leader in the school reform movement and President Obama’s adviser on education during his transition. Its blueblood board includes Stanford administrators and professors and Silicon Valley royalty with connections to Google and Cisco.
--Carol Pogash, NYT, on irony in East Palo Alto

The iPad can run Norway

A cloud of ash from a volcano in Iceland swept toward mainland Europe on Thursday, forcing up to 6,000 flight cancellations across the continent, according to the intergovernmental body that manages European air travel.

The prime minister of Norway was among those stranded by the closure of European air space.

Jens Stoltenberg, who was in the United States for President Obama's nuclear summit, is running the Norwegian government from the U.S. via his new iPad, press secretary Sindre Fossum Beyer said.

The inside straight

It was surprising enough to see that with the retirement of Justice John Paul Stevens, the Supreme Court will not have a single Protestant among its black-robed elite. But equally jaw-dropping was the fact that without Stevens, every member of the court has attended Harvard or Yale law school. ...

I’m not arguing to set aside a seat for mediocrity, as was done when President Nixon nominated a segregationist with a below-average legal mind, G. Harrold Carswell, prompting one senator to say that mediocre people “are entitled to a little representation.” ...

But clearly, Harvard and Yale need no extra seats at the high end of American power. The law school at Yale is currently represented by three justices — Sonia Sotomayor, Clarence Thomas and Samuel Alito — the latter two nominated by George H.W. Bush, Yale University class of ’48, and George W. Bush, Yale University ’69, Harvard Business School ’75.

Five sitting justices have gone to Harvard Law School — John Roberts, Anthony M. Kennedy, Antonin Scalia, Ruth Bader Ginsburg (though she transferred to Columbia) and Stephen G. Breyer. Three of them were appointed by presidents who went to Harvard or Yale. That’s an Ivy inside straight, a picture of narrow-minded exclusivity that defies the meritocratic ideals of this big land. ...

The current choices, for the most part, are more of the same. Elena Kagan, the solicitor general, is said to be the front-runner. And what did she do in the real world? Until recently, she was dean of Harvard Law. There’s also Merrick B. Garland, the appeals court judge highly regarded by some Republicans who went to — you guessed it — Harvard Law School.
--Timothy Egan, NYT, on the Harvard-Yale stranglehold

Wednesday, April 14, 2010

Perpetual crisis, please

For the first time in decades, researchers are reporting a significant drop worldwide in the number of women dying each year from pregnancy and childbirth, to about 342,900 in 2008 from 526,300 in 1980. ...

But some advocates for women’s health tried to pressure The Lancet into delaying publication of the new findings, fearing that good news would detract from the urgency of their cause, [Lancet editor] Dr. Horton said in a telephone interview. ...

Dr. Horton said the advocates, whom he declined to name, wanted the new information held and released only after certain meetings about maternal and child health had already taken place.
--Denise Grady, NYT, on why you shouldn't always trust activists. HT: Freakonomics

Tuesday, April 13, 2010

Privacy via virtual world

The creator of [the parlor game] Mafia is intensely private -- he agreed to meet Wired only within World of Warcraft.
--Margaret Robertson, Wired, on new ways of being discreetely interviewed. HT: Chris Blattman

Monday, April 12, 2010

The first unintended consequence

It is often said that the new health care law will affect almost every American in some way. And, perhaps fittingly if unintentionally, no one may be more affected than members of Congress themselves.

In a new report, the Congressional Research Service says the law may have significant unintended consequences for the “personal health insurance coverage” of senators, representatives and their staff members.

For example, it says, the law may “remove members of Congress and Congressional staff” from their current coverage, in the Federal Employees Health Benefits Program, before any alternatives are available.

The confusion raises the inevitable question: If they did not know exactly what they were doing to themselves, did lawmakers who wrote and passed the bill fully grasp the details of how it would influence the lives of other Americans?
--Robert Pear, NYT, on the first casualties of the health care bill

Saturday, April 10, 2010

There's no way your taxes aren't going up

Couldn't we get rid of the deficit by raising taxes?

No. A study we conducted at the Tax Policy Center found that Washington would have to raise taxes by almost 40 percent to reduce -- not eliminate, just reduce -- the deficit to 3 percent of our GDP, the 2015 goal the Obama administration set in its 2011 budget. That tax boost would mean the lowest income tax rate would jump from 10 to nearly 14 percent, and the top rate from 35 to 48 percent.

What if we raised taxes only on families with couples making more than $250,000 a year and on individuals making more than $200,000? The top two income tax rates would have to more than double, with the top rate hitting almost 77 percent, to get the deficit down to 3 percent of GDP. Such dramatic tax increases are politically untenable and still wouldn't come close to eliminating the deficit.
--Roberton Williams and Rosanne Altshuler, Washington Post, on why both taxes must go up and benefits must be cut. HT: Greg Mankiw

Friday, April 9, 2010

State-contingent strike zones

The [baseball] strike zone, as defined by the rule book, is supposed to be a constant of nature, like the speed of light or the boiling temperature of water. Well you know what? Don't you believe it! The strike zone, the size of it, is changing continuously, it gets bigger or smaller after nearly every pitch. ...

I can tell you why: because major league umpires are a compassionate bunch of guys. They can't help pulling for the underdog. ... They seemingly cannot avoid giving the batter a little helping hand when he finds himself down in the count, 0-2. But our boys in blue are not biased against pitchers, oh no. They are more than willing to come to the aid of a pitcher who has just thrown three straight balls. ...

Here are the numbers:
Count    Strike zone size (sq. ft.)
-----------------------------------
All 3.09
3-0 3.52
0-2 2.42

Wow, the 3-0 zone is nearly 50 percent larger than the 0-2 zone.
--John Walsh, Hardball Times, on the compassionate umpire. HT: Marginal Revolution

The upside of all-nighters

Postpartum depression affects between 5 percent and 25 percent of new mothers. ... There is a simple way to alleviate postpartum depression in just a few hours: sleep deprivation.

If a depressed mother stays up all night, or even the last half of the night, it is likely that by morning the depression will lift. Although this sounds too good to be true, it has been well documented in over 1,700 patients in more than 75 published papers during the last 40 years. Sleep deprivation used as a treatment for depression is efficacious and robust: it works quickly, is relatively easy to administer, inexpensive, relatively safe and it also alleviates other types of clinical depression. Sleep deprivation can elevate your mood even if you are not depressed, and can induce euphoria. This throws a new light on insomnia.

This remarkable result is not well known outside a small circle of sleep researchers for three good reasons. First, sleep deprivation is not as convenient as taking a pill. Second, prolonged sleep deprivation is not exactly a desirable state; it leads to cognitive defects, such as reduced working memory and impaired decision making. Finally, depression recurs after the mother, inevitably, succumbs to sleep, even for a short nap. Nonetheless this is an incredibly important observation; it shows that depression can be rapidly reversed and suggests that something is happening in the sleeping brain to bring on episodes of depression. All this offers hope that studying sleep deprivation may lead to new, unique and rapid treatments for depression.

Compensating differentials

[Coal] mining, unlike the low-wage jobs that predominate here [in Horse Creek, West Virginia], can provide a worker who is barely 20 years old with a home, a nice truck and a savings account.

“That’s the way it is around here,” Ms. Quarles said. “How many people can graduate high school today and tomorrow make $70,000 a year?” ...

In Raleigh County, where the Upper Big Branch mine is located, underground miners make an average of $1,476 a week [$76,752 a year], or more than twice the average income in the county. ...

Evan Hash, 22, makes about $50,000 a year as a surface miner, a less risky and lower-paying job than deep mining. But with the birth of his first child last month, Mr. Hash is eager to take the classes required to go “down under.” He would make, he said, $1,200 more each month.
--Shaila Dewan, NYT, on the finite price of risking your life

Thursday, April 8, 2010

Why health care costs so much

Imagine that you could show up at a car dealership and have any car you wanted, and as many cars as you wanted, for no marginal cost. The market for cars would be in complete chaos, and people would have too many cars, and the ones they had would be too nice.

That is more or less the situation we now have with health care. It isn’t pretty to talk about, but if it costs $200,000 to keep an octogenarian alive for a month, someone has to pay for it. If it were the children of that octogenarian who had to cover part of the bill, and paying for that last month of life was the difference between being able to pay for the octogenarian’s grandchildren to go to college or not, there would be some hard choices to make. With health care expenditures approaching 20% of GDP, there are going to be tough choices. Markets cannot function when the people who receive the benefits of a good or a service are not the ones who are paying for it.
--Steve Levitt, Freakonomics, on the consequences of charging zero

Young businesses, not small businesses

Despite the claims that small businesses are prolific job creators, they are just so-so in this regard. Rather, it is young businesses that are the real job growth engine. Recent work by economists John Haltiwanger, Ron Jarmin, and Javier Miranda shows that a 25-year-old small business is likely to shed jobs, not create them. Among firms under 5 years old, job creation is driven by the smallest firms.
--Josh Lerner, Boston Globe, on the myth of the small business

Saturday, April 3, 2010

The finite value of human life

According to a recent paper by Lee S. Friedman, Donald Hedeker, and Elihu D. Richter, the lifting of the federal 55 mph speed limit in 1995 was responsible for 12,545 deaths between 1995 and 2005. That’s about 45 percent more American fatalities than we have suffered in 9/11, Iraq and Afghanistan put together. And all those human tragedies are due not to weighty national security imperatives but to the fact that we all want to go just a little bit faster. ...

None of the papers I’ve seen have calculated the economic benefits we derive from going faster, in large part because they vary so widely. (Benefit of high speed limit to driver on lonely rural highway: potentially large. Benefit to driver on congested urban freeway: zero).

But nevertheless the benefits are there. If cancer researchers can save a few minutes a day on their commutes, some of that time will go to finding a cure for a dreaded disease.

Plus, going faster is fun. I admit I like it, and I don’t even like driving. ...

Is the trade-off of safety for speed worth it? This may be more of a question for a philosophy professor than a transportation scholar. ...

Even though partisans on either side of the political spectrum sometimes take the position that every human life is priceless and cannot be sacrificed no matter what the circumstances (the left wants to abolish the death penalty; the right wants to abolish abortion), politicians of all stripes make decisions that take human life all the time, often with little scrutiny. The issues surrounding automobility are an important example.
--Eric Morris, Freakonomics, on how we make trade-offs with human life every day

Thursday, April 1, 2010

Health care price controls come to Massachusetts

Making good on Governor Deval Patrick's promise to reject health insurance rate hikes deemed excessive, the state Division of Insurance this morning turned down 235 of 274 increases proposed by Massachusetts health insurers for small businesses and individuals. ...

Three of the four largest nonprofit health insurance carriers posted operating losses in 2009 due to job cuts at businesses that buy health insurance, increased use of medical services by employees fearful of losing benefits, and the slumping value of investments.
--Robert Weisman, Boston Globe, on rescinding the laws of supply and demand by fiat. See previous posts on price controls here.