Asymptosis

I’ve pointed out multiple times that despite Europe’s big, supposedly growth-strangling governments, Europe and the U.S. have grown at the same rate over the last 45 years. Here’s the latest data from the OECD, through 2014 (click for larger):

And here’s the spreadsheet. Have your way with it. More discussion and explanation in a previous post.

You can cherry-pick brief periods along the bottom diagonal to support any argument you like. But between 1970 and 2014, U.S. real GDP per capita grew 117%. The EU15 grew 115%. (Rounding explains the 1% difference shown above.) Statistically, we call that “the same.”

Which brought me back to a question that’s been nagging me for years: why hasn’t Europe caught up? Basic growth theory tells us it should (convergence, Solow, all that). And it did, very impressively, in the thirty years after World War II (interestingly, this during a period when the world lay in tatters, and the U.S. utterly dominated global manufacturing, trade, and commerce).

But then in the mid 70s Europe stopped catching up. U.S. GDP per capita today (2014) is $50,620. For Europe it’s $38,870 — only 77% of the U.S. figure, roughly what it’s been since the 70s. What’s with that?

Small-government advocates will suggest that the big European governments built after World War II are the culprit; they finally started to bite in the 70s. But then, again: why has Europe grown just as fast as the U.S. since the 70s? It’s a conundrum.

I’m thinking the small-government types might be right: it’s about government. But they’ve got the wrong explanation.

Think about how GDP is measured. Private-sector output is estimated by spending on final goods and services in the market. But that doesn’t work for government goods, because they aren’t sold in the market. So they’re estimated based on the cost of producing and delivering them.

Small-government advocates frequently make this point about the measurement of government production. But they then jump immediately to a foregone conclusion: that the value of government goods are services are being overestimated by this method. (You can see Tyler Cowen doing it here.)

That makes no sense to me. What would private output look like if it was measured at the cost of production? Way lower. Is government really so inefficient that its production costs are higher than its output? It’s hard to say, but that seems wildly improbable, strikes me as a pure leap of faith, completely contrary to reasonable Bayesian priors about input versus output in production.

Imagine, rather, that the cost-of-production estimation method is underestimating the value of government goods — just as it would (wildly) underestimate private goods if they were measured that way. Now do the math: EU built out governments encompassing about 40% of GDP. The U.S. is about 25%. Think: America’s insanely expensive health care and higher education, much or most of it measured at market prices for GDP purposes, not cost of production as in Europe. Add in our extraordinary spending on financial services — spending which is far lower in Europe, with its more-comprehensive government pension and retirement programs. Feel free to add to the list.

All those European government services are measured at cost of production, while equivalent U.S. services are measured at (much higher) market cost. Is it any wonder that U.S. GDP looks higher?

I’d be delighted to hear from readers about any measures or studies that have managed to quantify this difficult conundrum. What’s the value or “utility” of government services, designated in dollars (or whatever)?

Update: I can’t believe I failed to mention what’s probably the primary cause of the US/EU differential: Europeans work less. A lot less. Like four or six weeks a year less. They’ve chosen free time with their families, time to do things they love with people they love, over square footage and cubic inches.

Got family values?

I can’t believe I forgot to mention it, because I’ve written about it at least half a dozen times.

If Europeans worked as many hours as Americans, their GDP figures would still be roughly 14% below the U.S. But mis-measurement of government output, plus several other GDP-measurement discrepancies across countries, could easily explain that.

Cross-posted at Angry Bear.

In his dissent to Edwards v. Aguillard, Supreme Court justice Antonin Scalia made a neat distinction, sidestepping the issue of “legislative intent” that he finds so troubling:

it is possible to discern the objective “purpose” of a statute (i. e., the public good at which its provisions appear to be directed),

(The dissent is obsessed with “purpose”; the word appears 76 times therein.)

But in his dissent on yesterday’s King v. Burwell (Obamacare) decision, he chooses to ignore that statute’s obvious, objective purpose: to provide subsidies for buyers of exchange plans.

Rather than doing as he proposes, trying to “discern the objective ‘purpose’ of a statute'”, he seeks to deny the statute’s obvious purpose by determining the “purpose” of a few words therein — with a statement that can only be perceived as intentionally obtuse:

it is hard to come up with a reason to include the words “by the State” other than the purpose of limiting credits to state Exchanges

This very smart man could easily “come up with a reason.” Since those words contradict the obvious, objective purpose displayed by everything else in the statute, the words were accidentally misphrased. You might even go so far as to say that this is the obvious, “objective” conclusion.

Scalia would agree. In his dissent on the previous Obamacare challenge, he says:

“Without the federal subsidies . . . the exchanges would not operate as Congress intended.”

You may feel free to quibble over “purpose” versus “intention,” but the obvious, objective, intentional purpose of the statue was to give subsidies to purchasers of exchange plans.

Any attempt to deny or obscure that reality is pettifogging pedantry. Nothing more.

Update: Bruce Webb in comments shows just how objectively obvious the “purpose” is. The title of the statute’s opening section (emphasis mine):

Title I. Quality, Affordable Health Care for All Americans

Cross-posted at Angry Bear.

Today’s must-read Seattle Times article by Carol M. Ostrom and Amy Snow Landa (interactive graphic here and comparison table here) prompts me to write about a huge problem with American health insurance that I’ve been banging against quite personally in recent months.

Excerpts below give an idea what an important article this is. My thoughts:

Insurers are actively eliminating must-have hospitals from their networks, while imposing unlimited out-of-pocket charges for out-of-network services. If the provider you need (a pediatric or major-trauma hospital for instance) isn’t in your insurer’s network, you could face financial ruin even though you’re insured.

I’ve been deep in the individual health-insurance shopping game recently, shopping for myself in Washington State and for my 22-year-old daughter in Illinois. I even built a web app to compare total costs of different health plans, because there’s really no way to compare them without such a tool.

It’s incredibly complex, with all sorts of interacting variables to evaluate. I can’t imagine how someone without my analytical skills (and time to use them) could even begin to do a good job of it — protect themselves effectively and suss out the best deals to do so. Most would have to throw up their hands and throw a dart.

To be a smart shopper in this market, you have to be very smart, and have lots of time on your hands.

That pretty much describes me — the Republicans’ dream shopper, out there driving down insurance prices by comparing and carefully evaluating all the competition and choosing the best deal.

But even I have been completely flummoxed by one big issue: how do I evaluate the networks of providers offered under different insurers and plans? Sure, I can look to see if my doctor’s covered. Great. Big deal. But what if I have a major auto accident? Is Harborview (Seattle’s top-flight regional trauma center) covered? How about Children’s Hospital, our pediatric mecca? (Not an issue for me these days, but…) The Swedish Hospital system? (Top-rated for ER intake times, the place I would go for a medium emergency.) Seattle Cancer Care Alliance? (This is the outfit you’re gonna want if you face that horror.)

One and only one insurer in Seattle covers all those providers in-network. Most cover none of them.

Ostrom and Landa have done the legwork for us here in Seattle. If you’re elsewhere…sure: you can evaluate this — by going to every single insurer’s site, figuring out which of their often-multiple networks a particular plan supports, then successively searching those networks for all the possible providers using their little web tool, one provider after another, one insurer after another, and building yourself a table.

It’s basically like playing Battleship.

Realistic? Even if you could predict, in advance, what providers you might need someday (and you’re savvy enough to know which providers in town are important), we’re talking hours of work to check whether each plan covers them.

Here are the crux paras from Ostrom and Landa’s article:

The Seattle Times asked the seven insurance companies selling individual policies in the exchange in King, Pierce and Snohomish counties to list their in-network hospitals.

The results show that only one — Community Health Plan of Washington — includes Seattle Cancer Care Alliance, which offers treatment for some of the most complex cancer cases in the region.

Four of the seven insurers do not include the University of Washington Medical Center or the UW’s Harborview Medical Center — which has the state’s only Level 1 trauma center and burn unit.

Community Health includes every major hospital in King, Pierce and Snohomish counties, but is the only exchange insurer that does.

By contrast, Premera and its subsidiary, LifeWise Health Plan of Washington, include many major hospitals, but not the largest Seattle-area hospitals in the two major medical systems — Swedish and UW Medicine.

Let’s be very clear here: Premera and  Lifewise, two of the state’s biggest insurers, provide in-network coverage for none of the important hospitals I listed above. Not Children’s (pediatric). Not Harborview (major trauma).

Meanwhile many, most, or all of their plans have no limit on your out-of-pocket costs for out-of-network providers. If you have a serious illness or injury, you could be financially ruined even though you’ve got insurance.

This part really, really pisses me off:

Coordinated Care CEO Dr. Jay Fathi said the company would use “single-case agreements,” which he likened to an invoice or a bill. The hospital sends the bill to the insurer, who pays it, a system he said functions “fairly smoothly.”

Children’s officials say such agreements are quite rare and are generally limited to patients who are out of network because they live outside the local area. Resorting to single-case agreements, they said, would likely delay care for patients.

In other words, “Trust us. We’ll cover you if you need it.” (Yeah, and I’ve got a bridge for sale.)

This also points out that exposure to out-of-network charges, traditionally much more of a problem in rural counties, has now come home to urban dwellers. Seattle has traditionally been seen as a really great place to get sick — great providers with ample access.

That’s no longer true if you’re buying individual health insurance.

Cross-posted at Angry Bear.

Gentle Readers:

Sorry to be incommunicado for so long. I’ve been working hard on a couple of projects.

I built a spreadsheet for myself a few years ago to compare health-insurance plans — cost versus financial exposure/protection. I just built it out into a web app that others can use, and I’ve posted it here.

You enter premiums (after deducting any subsidy), deductibles, co-pays etc. for up to four plans, and it estimates your total outlays in different health/spending scenarios:

It’s especially good for ruling out relatively bad deals. For instance, why would anyone buy the purple plan here for an extra thousand dollars a year, instead of the green plan, which offers the same or better financial protection?

There are simply too many variable in health plans to compare them in your head. I’m hoping this app will be as useful to others as it’s been to me.

Farther afield, the second edition of my Hamlet book was just published, along with a fully hyperlinked ebook edition that I’m rather proud of. (Turns out it was a lot of work to create a really good ebook.) If you’re even one tenth as interested in this play as I am, you might find the book interesting and entertaining. Further insights into the true depths of this obsession at princehamlet.com.

Cross-posted at Angry Bear.

Andrew Oh-Willeke points us to this, on the job market for lawyers:

Slightly more than half of the class of 2011 — 55 percent — found full-time, long-term jobs that require bar passage nine months after they graduated, according to employment figures released on June 18 by the American Bar Association.

I couldn’t find a comparable figure for medical graduates on a quick search, but I’m guessing the number’s in the low single digits.

The lawyer glut has been going on for a while, and at least in Canada (the only place I’ve found data) it’s been having predictable effects on legal fees — down 40% in nine years ’01–’10:

I doubt that doctors’ fees are the prime driver behind our crisis of rising health-care costs (what providers charge). But at least one analysis says it’s an important part (Todd Hixon, Forbes):

U.S. spending annual on physicians per capita is about five times higher than peer countries: $1,600 versus $310 in a sample of peer countries, a difference of $1,290 per capita or $390 billion nationally, 37% of the health care spending gap. These conclusions come from an analysis co-authored by Miriam Laugesen of the Columbia University School of Public Health and Sherry Gleid, an Assistant Secretary in the U.S. Department of Health and Human Services (source)**.

This suggests that relieving the supply shortage — especially for primary care doctors — could have a big impact. Not a new insight, but I thought this data point would be of interest.

Update: In response to WH10’s good comments, perhaps some better thinking:

Maybe the answer’s to relieve the shortage of specialists, driving down their compensation and making primary care (relatively) a more attractive career option.

Cross-posted at Angry Bear.

Or: You Just Can’t Make This Shit Up

“Health Care Costs Put U.S. at Significant Disadvantage Compared with Global Competitors”

I’ll let you read the details, but short story:

Whodathunkit?

And what do they recommend?

Creating greater consumer value in the health care marketplace by using health information technology and empowering consumers with more information about good quality health care.

Providing more affordable health insurance options for all Americans by creating an open, all-inclusive private market for health insurance and replacing today’s fragmented state-by-state market with multistate markets. To ensure that insurance plans are solvent and meet certain minimum requirements, the role of individual states as the primary regulator should continue. Broader, more competitive markets will create more choices for more health care consumers.

Engaging all Americans in taking an active role in their health care. First, this means placing an obligation on all Americans to obtain health insurance either through their employer or the private market. Second, we must encourage all Americans to participate in employer- or community-based prevention, wellness and chronic care programs.

Offering health coverage and assistance to low-income, uninsured Americans that create a stable and secure public safety net. This assistance would be financed from the cost savings and efficiencies generated by a more competitive and value-driven health care system.

The Business Roundtable Health Care Value Index – Executive Summary | Business Roundtable.

Cross-posted at Angry Bear.

He really said that. I guess people take their kids to annual checkups because they want to signal their high status to others.

This is totally in keeping with Jonathan Haidt’s findings: on measures that “have anything to do with compassion,” libertarians are at the very bottom of the political spectrum.

Likewise Tyler Cowen’s paean to autism, whose defining characteristic is an inability to empathize with other humans.

You’ll constantly hear libertarians claiming that their ideas and policies would be “good for the poor,” but given their measured failure of empathy and compassion, you have to wonder whether those claims might merely constitute false status signaling in a species for which empathy and compassion are hard-coded values.

I really should stop donating page views to the Koch Brothers-funded GMU/Mercatus cabal (and you’ll notice I don’t provide a link here; you can Google it if you wish). But it’s like watching a very well-choreographed train wreck: it’s hard to look away.

Update: I find that some obvious googles don’t turn up Kling’s post, so here’s a link with a “nofollow” tag so the post doesn’t get any Google juice from it.

Lane Kenworthy once again gives us one of those graphs that encapsulates a whole global scenario, over four decades:

Yeah: we’re #1.

Edit: just to note that while we were on the high end of the spending pack until about 1980, we were within the normal range. It’s only since then that things really went off the tracks.

America’s inefficient health-care system: another look « Consider the Evidence.

Yes. And yes.

Krugman agrees:

Its the Health Care Costs, Stupid – NYTimes.com.

The key graphic:

For those who don’t click on links that say “Source,” click here:

Medicare Versus Private Insurance: The Data – NYTimes.com

No, this is not about lead-footed Starsky and Hutch-style car chases by law enforcement.

Rather, it’s about damned convincing evidence that unleaded gasoline (introduced in the U.S. in the 70s) is largely responsible for the huge decline in crime rates since the early 90s. (Update: it continues.) Even more convincing than (but not precluding) Levitt’s Roe v Wade hypothesis.

Short story: we spent fifty years quite literally poisoning the minds of our children — especially inner-city and low-income children. The damage is permanent.

Researcher Rick Nevin is getting some well-deserved press (Washington Post, Wall Street Journal) for his cross-country analyses of lead exposure and crime. (Worth noting: he first published this research in 1999.)

Here’s a picture; you can eyeball the correlations yourself. The researchers, naturally, analyze the correlations more systematically.

Here’s more, consumption of lead in gasoline in the USA, in thousands of metric tons (click for source):

See also the work of Jessica Wolpaw Reyes, who claims that half the decline in crime resulted from less lead in the environment (hence in little kids’ heads).

Robert Waldmann (hat tip!) at Angry Bear is looking at the latest data from the UK, where they went unleaded thirteen years later, so the effects should be showing up now. They seem to be:

the total number of violent crimes was basically identical in 2004/5 2005/6 and 2006/7 then declined about 17% by 2009/10. The predicted peak of 2007 corresponds about as precisely to the data as is conceivable.

From the WaPo article:

Chicago’s Robert Taylor Homes, for example, were built over the Dan Ryan Expressway, with 150,000 cars going by each day. Eighteen years after the project opened in 1962, one study found that its residents were 22 times more likely to be murderers than people living elsewhere in Chicago.

Nevin’s finding implies a double tragedy for America’s inner cities: Thousands of children in these neighborhoods were poisoned by lead in the first three quarters of the last century. Large numbers of them then became the targets, in the last quarter, of Giuliani-style law enforcement policies.

We’re seeing it in spades: the history of tetraethyl lead (read it and weep) is a tragic textbook case of market/profit interests eviscerating the commons and making us all (including the rich) far worse off, in the name of “the invisible hand” making us all better off.

That ebil gubmint man with his heavy-handed regulations impinging on honest businesspeople (who are just trying to make a buck, for everyone’s benefit) sure did have a pernicious effect, huh?