Saturday, May 31, 2014

James Altucher on College

Glenn Beck sits with James Altucher to talk college.

We've discussed whether college is worth it for most people.  I always want to pull out my "Hillsdale exemption" card at these discussions, but we should be honest that the vast majority of colleges offer very little quality education for loads of debt.

I like that James argues against college not just for the upfront cost, but for the opportunity cost as well.  What could you have done in four years?  A lot of great things that won't put you in debt.

I still think that college is for some people, but all generalizations are general.  And at this point, we should be comfortable saying that a lot of people are in college who shouldn't be there.  I am glad that people like James and Glenn have the courage to bring this up.

Bad food = more eating?

One of the most counter-intuitive lessons I remember from economics classes is how forcing people to smoke light cigarettes may actually increase smoking.

What happens is when you change the constraints on someone without changing their preferences, you are going to lead to a different outcome, and it will likely be something different than you intended.

The same goes for food.  This article makes some good points about French vs. North American attitudes about food.  I tend to ignore Francophilia, but the author has a point.  The French aren't afraid of butter!  No fat-free yogurts for them.  But since they are getting wholesome food, they do not overindulge.  You could make the argument that the French have all kinds of food regulations, but to my knowledge they are not for dietary reasons but instead for cultural of economic.  I am talking regulation intended to make people healthier.

Policies to change peoples' eating habits often does not meet its intended goal.

Is Michelle Obama listening?

Friday, May 30, 2014

Shlaes on the Graphic Novel


We covered this yesterday, but Amity Shlaes is all over promoting her illustrated edition of The Forgotten Man.  What makes this promotion unusual is that she is not only marketing her book but defending its medium as a whole.

Shaes argues that conservatives are failing to capitalize on the popular graphic novel genre.  These books are especially popular with young people and are increasingly acceptable literary sources at schools.  Shlaes believes that conservatives have turned up their noses too quickly at this trend.

Are conservatives really being too hard on graphic novels?   Yes and no.  Illustrated editions of the classics are nothing new and are great introductions to the real thing.  I can remember illustrated versions of various classics as a child.  The Inferno, The Hobbit, and Alice in Wonderland had all been rendered with beautiful drawings by artists of all eras and styles.

The difference between these illustrated editions and the graphic novel is that in illustrated editions, the text was still the crux of the work.  Illustrated versions meant exactly that – it was the same piece of literature, but with pictures.  This is very helpful for children, who may need help comprehending the difficult prose of Shakespeare or Dante.   The goal was never to supersede the book itself.

 Graphic novels, on the other hand, take the basic plot of a book, but reduce it to comic-strip format.  This is a sweeping generalization, but from what I have seen, the graphic novel does not match a regular piece of prose in its depth and vocabulary.  An easy comparison: a movie is hardly ever as detailed or thought-provoking as the book from which is was based.

While I commend Shlaes for her new book, I’m not sure her rallying cry for the graphic novel is necessary.  Shifting the political discourse to what will always be a reduction of the original is not how to change minds.

Internet pennies

I enjoy listening to NPR's Planet Money.  They make economic theory manageable to the average listener, through stories on everything from violins to professional sports.

I'm frequently disappointed, however, in the incomplete economic thought that goes into the show.  The reporters tend to miss some pretty simple connections from their story to economic principles.  It makes the story feel more like a human interest piece rather than applied economics

The recent show on the value of a penny is a great example.  This would have made a great exhibit of how the internet has lowered transaction costs.

The reporters went all over Manhattan to see if they could buy anything for a penny.  The closest they found was at a dressmaker. The shopkeeper told them that a single sequin would cost about one penny, but she would not bother selling it too them.  She said it wouldn't be worth the time to transact the deal.  This is, quite literally, a transaction cost.  Other shopkeepers said that in similar instances, it was actually more cost-effective to give away penny merchandise than to actually sell it.  The transaction costs outweighed the sale.

Flash forward in the show to the internet startup looking to disburse micro-donations to various content providers, and the problem of transaction costs disappears.  The internet has unlocked value potential to the smallest fraction of a dollar by bringing transaction costs basically to zero.  So the internet equivalent of a sequin -- let's say a video or blog post -- can be traded for a penny, with economic benefit.  With the millions of customers surfing the web, this could be a real moneymaker for many online content providers.

Unfortunately, Planet Money failed to develop this idea, and the value of a penny in the online world vs. brick-and-mortar remained more an oddity than an explainable phenomenon. The application of transaction cost theory would have made for such a more stimulating show.

Thursday, May 29, 2014

May 29, 1453

Today the Roman Empire fell.

I am happy to see the fall of Constantinople got some modest coverage in the conservative blogosphere.  People are starting to see the Byzantine Empire as not some esoteric force from long ago but the very continuation of the same Roman Empire from which we derive much of our civilization.


Forgotten Man -- Graphic Novel

What better way to give a portrait of the "Forgotten Man" of the Great Depression than by literally drawing him in a graphic novel?

Amity Shlaes recently came out with this sequel to her classic The Forgotten Man.  I heard her on Peter Schiff this morning.  I'm looking forward to reading a comic book!

Wednesday, May 28, 2014

Student Health Plans going to Medicaid?

Kaiser Health News is reporting that schools are beginning to experiment rolling their student health plans into Medicaid.

Funny how this same class of "young invincibles" that are necessary for the ACA to work are being given every possible incentive not to buy their own health insurance.  First, it was the extension of staying on parents' health plans.  Now, colleges are signing students up for Medicaid.

It would also be interesting to see how HHS accounts for these "new" health plans.  Even individuals that previously were on plans but then lost coverage due to the ACA are counted as "new" when they get an exchange-approved or Medicaid plan.



Nate Silver on Piketty

More mandatory Piketty coverage:

Nate Silver weighs in on "Spreadsheet-gate" with a surprisingly balanced take.  I had always assumed Silver to be a left-leaning ideologue, but he provides thoughtful analysis here on the use of data in the social sciences. 

While I understand the unreliable nature of economic data, it is still hard to absolve doctorate-level economists of making pretty simple spreadsheet errors.  Malign it all you like, but good spreadsheet skills require as much methodology as the data gathering itself.   Piketty's hard-coding would have been shot down pretty quickly in most workplace settings.

Monday, May 26, 2014

More non work related activity

It is good to see that the NY Times has something to say about Cleveland other than its economic depression.  This weekend featured a review on The Cleveland Orchestra's performance of  Janacek's"The Cunning Little Vixen."

Memorial Day

This will be a short call to action of a post, as it is Memorial Day Weekend.  Please consider going out to the various parish festivals that kick of the summer this holiday weekend.  In the Cleveland area, this is the Tremont Greek Festival.  But all across America, similar festivals are happening.  Here is a piece about the New Orleans Greek festival, highlighting the unique mix of Cajun and Greek cultures that has shaped the Holy Trinity Greek Orthodox community.

And before tucking into that delicious lamb shank or gyro, stop and reflect on all those who have perished in defense of our country.  It is almost guaranteed that someone from that church also remembers a fallen soldier who used to be in the pews with them every Sunday.

Sunday, May 25, 2014

Is it okay to criticize business practices?

This is a topic that people on both sides of the political spectrum often get wrong.

Amazon's tactics are getting the company into trouble with some in the publishing world.  The author accuses Amazon of a bait-and-switch with the literary industry, where Amazon lured authors and publishers into their nest, only to constrict them into a slow and painful death.

Many on the left would take this kind of journalism as a call to government intervention.  There is a long history of this kind of activism.  From Upton Sinclair's The Jungle to Ralph Nader's Unsafe at Any Speed, writers' exposés have been followed up with regulation many times.

And some on the right would insist that if people didn't like what Amazon is doing, then they don't have to buy it.  Nobody is forcing the publishers to cut these deals.  If it's not mutually beneficial for everyone involved, there wouldn't be a market for it.  Therefore, just be quiet and let business go as usual.  It's not your business to criticize the dealings of others.

I am far more inclined to the second line of argument.  But, I don't see why it contradicts step one of the first point.  We have freedom of speech.  If someone is concerned about a website's business practices, is it not fair to express those opinions?  After learning more, some customers might also be concerned with the future of books if Amazon grows too powerful.  Some of those customers might even try to build a business to compete with Amazon on a platform that is more fair to publishers.  The "creative destruction" of capitalism takes effect, and Amazon grows weaker.  Obviously with the distinction between free speech and slander, free market advocates should not decry every publisher's criticism of a company.  These can be without also inviting further government intrusion in the private sector.

Saturday, May 24, 2014

Piketty Math

The media is developing some stories that Thomas Piketty got the math wrong in his now-infamous Capital in the Twenty-First Century.  We've seen this before.  A year or so ago, the models in Reinhart and Rogoff's This Time is Different were revealed to have some errors in calculation.   

A couple of points here.

First, unlike the natural sciences, economics is not inherently quantitative.  Economics is a study of human action, and there are no static laws of how humans will behave.  While quantitative methods can reveal insights into human behavior and economic trends, it will never be able to predict with total accuracy any economic theory.

Secondly, and probably more important for Piketty, is that the numbers don't matter.  Piketty is motivated by his ends, and the models are just supporting evidence.  Tom Woods had a great program with Bob Murphy the other day, picking apart the tenets of Piketty's book.  The most damning to me was that Piketty more or less admits that his calls to action are driven less by economic outcome than an egalitarian sense of "fairness."  

I remember reading in Mises' Human Action that if we look at the ends to which we are addressing our economic theory, most people are generally on the same page.  Everyone wants freedom, a high standard of living, etc.  This may have been the case in Mises's time, but it is hard to say whether that is true now.  Dennis Prager develops this idea a bit further.  It relates as much to Piketty as his own examples.

Friday, May 23, 2014

"Be That Way!"

This will be a short post because it's Friday and I'm exhausted, but I don't want to fall into a bad habit and not update!

Burger King will be changing its motto from the product-oriented "Have it Your Way" to a more lifestyle-focused "Be Your Way."  The impossibility of this platitude notwithstanding, I just don't care for it.  "Be" is such a passive-aggressive verb that it is hard to tell whether BK is inviting or challenging you.  All I can think of is the exclamation, "Fine!  BE that way!"  It also conjures up the expression "Be on your way,"  which could make sense for a fast-food chain, but also invites you to pass up the restaurant altogether.

Just when BK seemed to be launching some unique strategies it had to go and do this.  Branding fail.


Wednesday, May 21, 2014

Windows Hate

This was probably supposed to be some grand political-economic grandstand, but it almost sounds like a story from The Onion.  MarketWatch reports that China has banned Windows 8 from all government computers.

If they really wanted to shock America, they should have banned the iPad or Instagram or something that people actually like.  This may have been in retribution for some kind of cyber espionage race, but obviously it wasn't signalled in a way that people took seriously.

In fact, it kind of sounds like a good idea....  Windows 8 was not designed with the Chinese government worker in mind, I would imagine.

Tuesday, May 20, 2014

Is Leisure vs. Labor Irrelevant?

This New Yorker piece brings up a worthy dilemma of our age.  The focus of this story is on Keynes's prediction that future generations will have so much idle time that it may even be bad for society.  Anyone who works even the most flexible of full-time jobs has to be laughing.   The story brings up some ideas on how Keynes could have been so wrong.  Here is my theory.

Keynes postulated that as more capital was accumulated, this capital would be substituted for labor, and in turn, people could use that time that would be spent on labor for leisure.  While useful for modelling purposes, it is against the facts of life to split leisure and labor, especially in a post-industrial age.  This trade-off worked pretty well when a worker's options were either to be on the assembly line making widgets, or back at home where work was inaccessible.  The digital age has made this distinction obsolete.  While working from home is a possibility, is calling in to a conference while shopping online leisure or labor time?

Our standard of living greatly surpasses previous generations, but one consequence has been the loss of a work-leisure distinction.  Keynes lived right at the tail-end of this revolution, and still thought of a clear trade-off between the two.  Unfortunately, anyone who works in the 24-hour e-mail cycle knows that mixing "business with pleasure" in this way leans incomparably toward business.

Monday, May 19, 2014

Prager University

Great work again by Prager University.  If you've ever wondered why colleges are approaching 60/40 female, here's a big reason.

I would add another prescription to ending the assault on boys in the classroom:  classical education.  Greek mythology and Caesar's Gallic Wars captured the imagination -- and the attention -- of boys for centuries.  This makes a more convincing argument than Ms Summer's idea to let boys draw monsters and skateboarders.  



Consolidation in Health Care

Health Affairs has a post today about the effects of health care consolidation.  We at our nascent blog have also begun to explore the effects of this trend.  With individual providers joining hospitals and even whole health care systems being acquired by their larger competitors, the consolidation of care is one of the ACA's strategies.  The logic is that if one provider can see through a patient's health, focusing on preventive care and lowering costs rather than charging more and more for perhaps unneeded procedures, the cost of care will increase.

I am skeptical about this proposition, and it sounds like the jury is still out in general.  Specialization is the fruit of an advanced economy.  Why limit that in health care?

Sunday, May 18, 2014

Jobs they won't take?

This WP piece highlights another interesting debate in the college vs. manufacturing job debate (also discussed here yesterday).  The conventional wisdom is that there are all these manufacturing jobs available, but young people refuse to take them.  They find them too dirty and dead-end.  This is the much-cited "wage gap."  

This reminds me of a proud homeowner who refuses to budge on an asking price even though the house has been sitting vacant for months.  The market is demanding one thing, and her opinions another.  At some point, she will have to give into the market demand.

I will not doubt that given the choice between a cubicle job and a welding job, most Millenials (myself included) will choose cubicle.  In an era where increasing numbers of youth are raised in suburbia and have never farmed, fixed a car, cleaned a gun, etc., we lack the intuitive knowledge of the trades.  With that, we lack knowledge of the joy that working with the hands can bring.  It is simply going to take more convincing -- and training -- to get Millenials to work in the trades.

It is hard, however, to shed too many tears for employers.  Like the article stated, if they really wanted to hire more young people, they would adjust their wages.  I think there is a bit of an entitlement factor among employers, as well.  They want a round peg for a round hole.  In an increasingly specialized economy, this is nearly impossible.  To step into the job on day one needing no training is not feasible.  Employers in all fields can be this picky, though, with the stagnant hiring market.  I couldn't believe the number of assessments, interviews, requests for samples of my work, etc., I had been asked when pursing an entry-level job.

The "skills gap," in conclusion, is a gap caused on both sides.  Young workers don't have the interest in learning the trades, and employers don't have the interest in teaching them.  At some point, if there really is a market demand for these jobs, the gap will close.  But like that proud seller, it could take some time for convincing.

Saturday, May 17, 2014

Hard Work U

This WSJ piece offers a compelling compromise to the raging college vs. workforce debate.  While I am convinced there is a bubble in higher education, I think some critics of a college education go too far.  While there is always a need for the trades such as plumbing, carpentry, etc., every industry is undergoing a data revolution.   To be a car mechanic today requires significant computer programming abilities, for example.  Advancing to a management position in the trades still requires some post-high school education.  Whether that has to be from college is debatable.  With so many fine online learning resources, the brick-and-mortar college needs to make a better case for itself.

The College of the Ozarks seems to be doing this.  Each student works his way through school, graduating debt-free.  What a great program.  I worked as an RA through college, and I found this one of the more rewarding parts of my education.  I met people and engaged in activities that would have never happened through my studies.  Employers often asked just as many questions about my college jobs as my actual studies.  I wonder how much of this real-world experience can be replicated for online learning.  While so much less expensive, you do get what you pay for.  For specialized training to those who already have a network, online education is a deal.  But for young people still making their connections and drafting their career plans, there is no substitute for a good college campus.

The debt-free feature of this program is almost unbelievable.  So many young adults are deferring retirement investments, buying a home, etc., because of the crushing student debt.  Leaving college with no debt will open up so many doors to these graduates.

The College of the Ozarks "business model" should get college administrators thinking.  While college is not for everyone, it can still be a good investment for a motivated young person - especially when the cost is nearly free.

Friday, May 16, 2014

Twittering Health Care

Interesting to see this Health Affairs piece discuss the use of social-media analytics in health care.  Medicare released detailed reimbursement information that was synthesized across the Twittersphere.  Some of this work contained serious analytics that gave consumers and health care professionals alike a better feel for the Medicare reimbursement system.  With pressures on Medicare mounting, it is important for hospitals to know what may be their best reimbursement strategies.

Unfortunately, though, it is difficult to see more benefits than simple gamesmanship come from this release of data.  As a large government agency, Medicare does not have the incentives to make the market adjustments.  If some specialties or regions are more expensive than others, patients are not compelled to seek the less costly competition.  The prices will not come to equilibrium.  While Medicare's reimbursements are based on a sophisticated algorithm based on value-neutral analytics, it would be naive to dismiss any political lobbying enters the process.  This New York Times piece shows how the weighting of specialists on Medicare lobbying and advisory boards tends to favor some specialties, such as dermatology, at the expense of others, such as primary care and obstetrics.

While big data, especially in the form of open-source data, is leading to breakthroughs in business, it is hard to see how this will very much impact what is, in the end, a government monopoly.

Thursday, May 15, 2014

Working for the Plan

I wanted a post that wasn't about health care, but it's just in the news a lot now...and, it's what I think about every day.  This story didn't even really mention health care, but I believe it was omitted on purpose.

This New York Times story highlights some interesting dilemmas of an aging workforce.  Employers are becoming slower in "putting out to pasture" their older employees.  With longer life expectancy, it only seems reasonable that people would work longer.  But to what extent?  Even with people living longer, it's hard to see an employee as productive at age 65 as one at age 35.  The last 10 years of life at age 75 will just not be as pleasant as the last 10 years at 55.  Chronic ailments are more common; things "break" more often.  While a thirty-year retirement may not be financially sustainable, can we expect 70-year-olds to be putting in 70-hour-weeks?  Hence these transition plans are springing up to gain from the wisdom of older employees while sparing them the 24-hour work cycle that is now the norm.

But I think there is another factor that hasn't been discussed....health benefits.  Medicare is taking huge budget cuts and the cost of care for the elderly is seriously high.  With nowhere else to go, could these older workers be focused on health benefits?  I have heard many older people say that they only stay on their jobs because of the insurance.  With many employers cutting benefits to part-time and seasonal workers, it seems tenuous to expect many benefits from a quasi-retired position.  

I hope the Millennials are taking notes....


Wednesday, May 14, 2014

Health Care Costs

This recent Fiscal Times article got me thinking about how to apply the lessons of e-commerce to health care.  The article stated at first that individual patient habits were to blame for expensive health care costs, but then goes on to explain that it's really because they can't make up their mind about what health care system they want to use.  Can anyone solve that first problem?  There is the "Nudge" phenomenon of gently compelling consumers to behave in desired ways, but this is a very new field of thought incapable of changing an entire industry at this point.

The second objection -- that customers are "spoiled due to the 'buffet effect'" -- puts the cart before the horse.  Why are customers spoiled?  Isn't freedom of choice a good thing?  Why assume that getting all services from one health care system is more efficient?  These claims assume away basic human behavior.  The author has muted enthusiasm that Accountable Care Organizations (ACOs) can direct patients to less-expensive costs of care.  These cost savings, however, are not borne by the consumer.  At the same time, consumers do not see the true cost of care.  This explains why ACO patients may bounce from one hospital to the next.

In the age of electronic medical records, the transaction costs of receiving care from numerous providers is lower than ever.  This is not the major cause for concern.  The payment structure is.

Tuesday, May 13, 2014

Big Data at the Hospital

This Wall Street Journal story caught my attention because it is capturing many of the trends in my industry.  The growth of data, cost control, and population health are all featured in this quest to use data science in health care.

The article implies that using data science may bring down some of the walls of specialization that can sometimes create communication backlogs between patients and providers.  Of course specialization creates value.  But as health systems grow into ever more detailed specialties, it becomes difficult to communicate results between areas.  Data can help point out connections between symptoms that are usually handled by other medical specialties.  What previously may have been just a coincidence involving a few isolated patients can now be spotted as a medical trend.  In other words, data can provide information that can scale.

This leads into the new emphasis on population health, which focuses on engaging the community in preventive health and lifestyle measures.  This may keep people away from costly emergency room visits, but we will always have a "tail" of patients with serious problems and hard-to-diagnose problems.  While inferential data statistics can do a lot of good, we should not forget what happened to our financial models during the economic meltdown.  Would we want to apply the same blind reliance on data to our health?
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