Something you’re not likely to see too often

by John Q on March 10, 2006

A favorable citation of my arguments at Tech Central Station. Normally, I’d be pretty concerned about this, but it’s from Tim Worstall, the sole exception, AFAIK, to the otherwise uniform hackishness of that site[1].

Worstall quotes my discussion of the Baumol effect to argue that the fact that the US spends so much more on health care than other countries is not necessarily a bad thing. At the aggregate level he’s right. We should expect the share of income spent on services like health and education to rise as income increases, driven by productivity growth in the goods-producing sector. In the case of medicine, the regular discovery of new and costly treatments adds to the demand for more expenditure (there’s an argument that this technological innovation is an endogenous result of the way health care is financed but I’ll leave that for another day).

Worstall is also right to imply that systems of public provision have, at least in some cases, led to pressure to hold expenditure below the socially optimal level. This was most obviously true of the National Health Service in Britain, though expenditure and service provision have increased greatly since the election of the Blair government, and are set to rise further. The same pressures are evident here in Australia.

That said, when you look at the US system in detail, it’s clearly not a matter of paying more to get more. While the health care available to the top 20 per cent of Americans (those with unrestricted Blue Cross style insurance) is probably the best in the world, the average American (insured by an HMO or a fee-for-service insurer with restrictions) doesn’t get any better care than in other developed countries and the uninsured are much worse off.

The real problems are the financing system (Worstall gets off a neat crack at the expense of JK Galbraith here, but the real problems go back to the 1930s, as discussed by Robert Moss in When All Else Fails) and the very high salaries of US doctors compared to those in other countries, reflecting both higher inequality in the US and the huge cost of becoming a doctor through the US higher education system.

One result is that, despite relying primarily on private, employer-provided insurance, the US government actually spends more, relative to GDP, on health than most others.

Finally, there’s the balance between medical care and public health, broadly defined. It’s well known that the US has a lower life expectancy than other countries that spend much less on medical care. This isn’t however, primarily due to inadequate access to lifesaving treatments (the poor miss out on lots of routine health and dental care, but they can usually get emergency treatment). Rather, it’s the result of unhealthy living conditions broadly defined to include guns, car crashes, the consequences of obesity and so on. These things aren’t easily fixed, but there’s more resistance to doing anything about them in the US than in most other places.

fn1. Why he keeps writing for them, I don’t know. Tim would do much better as the opposition writer in residence at a left or liberal site, a slot that is very hard to fill in my experience. He makes good points, is willing to admit that he’s wrong on occasion, and is gracious when he catches someone else in error, as he has done with me. Still, that’s his business.



Nat Whilk 03.10.06 at 4:28 pm

Which left/liberal sites welcome opposition writers?


John Quiggin 03.10.06 at 4:38 pm

Salon had David Horowitz for a while, until his whining got too unbearable (this was what motivated my comment about these slots being hard to fill).

Hitchens gets a pretty good run on Slate, as does Stephen Landsburg who’s silly more often than not.


Ross Smith 03.10.06 at 4:42 pm

This has absolutely nothing to do with the subject at hand, but I never fail to get a small (and, I’ll freely admit, entirely unfair) chuckle out of the frequent references to “Blue Cross” (an insurance company, I gather) that always crop up in any discussion of the American medical industry. Here in New Zealand, a blue cross is the standard symbol of the veterinary profession.


Jared 03.10.06 at 5:08 pm

Krugman’s piece in the NYRB last week makes similar points.


Barry 03.10.06 at 5:21 pm

John Quiggin: “Salon had David Horowitz for a while, until his whining got too unbearable (this was what motivated my comment about these slots being hard to fill).”

John, it’s not that the slots are hard to fill, it’s that, for some reason known only to squishy center-left editors, they don’t want to put a sound conservative/right-winger/libertarian in.
I want to say that it’s like they’re really looking for a column of all fart jokes, because they put nothing but a-holes in there. Horowitz and Hitchens need no introduction, but if Landsburg was the best right-wing economist with a spare couple of hours per month, then that wing of econ has certainly withered.

I wonder if it’s because these editors honestly don’t understand the difference between taking a contrary stand out of principle and reason, and being a puffed up ‘politically incorrect’ jerk, who prides himself on false bravery? I’ve felt that in general; perhaps this is just another manifestation.


Amanda 03.10.06 at 5:34 pm

It’s not that the slots are hard to fill, it’s that, for some reason known only to squishy center-left editors, they don’t want to put a sound conservative/right-winger/libertarian in.

I’d largely agree, and point to Obsidian Wings as a rare example of a site with strong center/left bloggers and a majority of center/left commenters that does better than most at retaining center/right bloggers. (Commenters are another matter.)


Tim Worstall 03.11.06 at 1:59 am

Jared: Part of the inspiration (if I can use such a grand word for a little polemic) was indeed that NYRB review by Krugman. I basically take that piece, mix and match with a new book by Johnny Munkhammar (of Timbro in Sweden) and use JQ to back up some of my points.
John, many thanks for the kind words. Admitting to error, well, when you make as many as I do it seems only fair to ’fess up. “Ooops” is so much shorter (and possibly politer) than 1500 words of stonewalling.
As to why I write for them? I get to write on whatever is buzzing round my bonnet that week, learn a lot in doing whatever research I do do, clear up ideas in my own mind while doing so and in general enjoy myself. When corrected I learn even more. I also cover the beer bill.
There is also the rather grubby point about anybody freelancing. Absolutely the most difficult thing is to get an editor to read that first submission, most especially in paying markets. Nick Schultz was the first editor (well, apart from some very small pieces in the Moscow Tribune and New Times of SLO a decade ago) to be willing to do so and then actually use pieces. I’m extremely grateful to him for doing so.
Slate, Salon? I doubt it somehow but perhaps this could be a CT campaign? Find Tim another freelance outlet?
As to “hack”, often a word of approval in English English. After a piece appeared in the DT one Observer columnist emailed to say that I was a “proper hack now”: I assume those were words of approval anyway.


Thomas 03.11.06 at 2:10 pm

On one topic (if not on the other): why would we think that high educational expenses on the way to becoming a doctor are a cause of high doctor salaries? Wouldn’t we expect it to run the other way–that people would pay a lot to become a doctor, because it is such a lucrative position? (That’s certainly what we see in my field.)

I don’t think JohnQ’s description of the present state of the insurance market in the US is entirely accurate. HMOs continue to decline in market share, and are being replaced, up and down the ladder, by PPOs, which provide access to care but, unlike an HMO, require the payment of a deductible (typically on a variable scale depending on whether the care in provided within the designated group or without). In a PPO, then, what differentiates the level of care received is, to a degree, knowledge of which doctors/institutional providers are better than others, and pre-existing financial resources. The top 20% (however defined–whether by education, income, wealth, status) likely do better under a PPO than those further down the ladder, not because the PPO provides unlimited care, but because they are more likely to have the knowledge and resources to fully advantage themselves under the plan.

Comments on this entry are closed.