Flying the Friendly Skies

Today I just got back from Houston for Thanksgiving break. I took a plane because I felt a 17 hour car trip would seem a little too long. Instead of driving I took a plane (Southwest) first from Houston to Dallas then from Dallas to Lubbock. There were some light showers and there was some turbulence. For some reason in the air I didn’t feel as safe as if I was in the car. I suppose many other people feel the same way. I saw an article recently that showed that airplanes are 7 times safer in 2008 than in 1989 (1.4 fatal accidents per million as opposed to .2 fatal accidents per million). Technology, regulations, and more experience in the air have made all of this possible. When I was walking off the plane I peeked into the cockpit to see what type of instruments the pilots used. I kid you not the dash area and whole cockpit area looked as if it was a little laboratory with all kinds of dials, switches, and display screens. Pilots now have technology and safety features that the Wright Brothers could only dream of!

With this said, people like myself and others sometimes feel a little unsafe when flying the shear evidence that flying is the safest form of transportation. My theory on why this may be true is that people have some kind of bias to where they believe even though the statistics say one thing events occur often more than they really do. An example of this would be to ask people how often they believe an airplane crashes. It should also be pointed out that anyone who watches the news or reads the newspaper might be lead to believe that airplane crashes happen occur more often than when they do. What people fail to realize is how unsafe other forms of transportation are such as driving, riding a bike, or even walking. More people die from these accidents than from fatal airplane accidents. Although, it might be hard to convince people that flying is safer than walking.

Another reason I think people tend to be fearful of flying is that they are not in control of the airplane. Pilots are delegated this duty and passengers are just along for the ride. Individual passengers really have no say in how the pilots fly which takes some of the control away from the passenger. One question that comes to mind however is that since people know that not all pilots have the skills and experience why not have differential pricing for different pilots? In practical terms this would be hard to carry out. First off pilots do basically the same thing which is to get you to your final destination. Second, crashes or accidents happen so infrequently it would be hard to quantify this through price. Also factors such as the weather could have a major influence on how people perceive their pilot even though pilots only have so much control. I would file this under 99% theoretical and 1% practical.

People should be aware that flight safety has greatly improved over the past 20 years and it will continue become more advanced. As the number of flights increase airline companies, researchers, and plane manufactures will be able to make safer planes. Next time you are in the airplane just remember if you were able to survive the trip to the airport you will survive the plane ride.

Source:
http://www.livescience.com/culture/090601-air-crashes.html

One of My Heros

I use to believe that the minimum wage could actually help people until I took economics. I use to believe that politicians were good people and did everything that helped everyone. I use to think many things until I was introduced to Dr. Walter E Williams. Dr. Williams is a professor of economics at George Mason University. Although, I have never met Dr. Williams I have been influenced by his ideas along with other intellectuals. Dr. Williams's excellence comes from the fact that he is able to take complex ideas and explain them in a way that anyone can understand. One of his professors Armen Alchian (an economist from UCLA) explained that the true way you know if you really know something is if you can "explain it to someone who doesn't know a darn thing about it". This concept is clearly shown in his weekly syndicated column and through other writings of his.

The first time I saw Dr. Williams as on Friday February 9, 2007 on Kudlow and Company. I remember listening to him and thinking this is a smart man. Sure enough I did some searching online and I found an interview with him via Wikipedia. From this point on I began reading his work and became introduced to other intellectuals such as Milton Friedman, Thomas Sowell, along with many others. Clearly, this one man introduced me not only to economics but to a different way of thinking. I would regard Friedman and Williams as libertarians and Sowell as a conservative. Although, Sowell does favor some libertarian ideas. Williams did a one hour podcast interview on EconTalk (excellent program) hosted by Russ Roberts where he talked about starting out as an economist and why he truly believes what he believes. I posted the link to that interview below. The only critique I have with Dr. Williams is that he tends to repeat the same ideas over and over. This in a way is good because he is consistent and doesn’t flip flop on his ideas but can get old at some points. Still I truly regard him as an important person in shaping my intellectual journey. My point is that it is interesting how one person can lead you down a path of different ideas and people.

Williams on EconTalk:
http://www.econtalk.org/archives/2006/10/walter_williams.html

The Poor Getting Richer

While many people like to show how the poor are getting poorer and the rich are getting richer this clearly is not the case. Often times people complain of how the poor can't make ends meet. My response might be what ends are they trying to meet? Data from the Census bureau confirms that the poor have improved their quality of living over time. For instance only 3.4% of people below the poverty line in 1984 were able to afford VCR's by 2005 more than 92.2% of the people below the poverty line had a VCR. Technology, innovation, and competition brought down the price of VCR's and other goods so everyone including the poor could afford them. In addition to this the "poor" now almost all have telephones, refrigerators, stoves, and air conditioners. Another point to consider is if you asked a poor person what country they would live in I would be willing to bet money that a majority of them would say the United States. This of course doesn't say that the United States or capitalism is perfect. However, people must understand that in a world of scarce resources there are alternatives. Believing that there is some perfect system or utopian world is nonsense. Many times people complain of companies such as Nike or Wal-Mart participating in child labor. While this is an unpleasant situation people don't realize that people in these countries have very few alternatives. Employers have very little incentive to pay these people nothing given the employee some options in their employment. Some factories are flooded with so many applications that it takes months to hire people because so many people are trying to apply to these sweatshop jobs. My point however is that capitalism does help even the poor people even though you will hear how the poor or worse off and the rich are getting richer.

Lawyering

Since the recession began millions of people have lost their jobs. Many people are looking for work while others are trying to see if they can gain a competitive advantage amongst their peers by going back to school and getting an advanced degree. Also many people who are in ready to graduate from an undergraduate program are looking to alternatives such as going to some graduate program since the job market has been so miserable.

It seems as if the number of people who want to attend law school is on the rise. The number of people who have taken the LSAT is gradually rising. From 2000-2008 the number of people taking the LSAT increased by around 28%. In October of 2009 the number of people that took LSAT increased 19.8% year over year. I highly doubt that the number of applicants offered admission into law school has also increased by these amounts. It should be pointed out though that just because someone takes the LSAT doesn’t necessarily mean they go to law school. In fact, there are actually more people in law school today then practicing lawyers.

This story caught my eye because it beautifully illustrates the concept of supply and demand. Since it appears everyone wants to go to law school and law schools can only accept so many applicants wouldn’t it seem as if there is a supply-demand problem? Currently there are around 200 ABA accredited law schools. However, in 1963 there were only 135 accredited law schools. It seems as if the number of law schools has only increased 32.5% over a 45 year period. This is a problem when the number of applicants increases 28% in an 8 year time period.

Another question would do lawyers contribute to society. Most people are familiar with trial lawyers but are unfamiliar with other types of lawyers such as: tax attorneys, estate planners, patent lawyers. My question how are trial lawyers adding value to society. Clearly, trial lawyers redistribute wealth from the party that committed a tort (wrong) to the plaintiff. Decisions in trials are made by a judge and jury who can base their decisions off emotions rather than rational thinking. What is even more interesting is in some counties judges have a political representation (republican or democrat) and get a large proportion of their contributions from local lawyers who could possibly influence their decision. Shouldn’t judges use their judgment based off the law and past precedents? However, I will contend that not all lawyers are bad. For instance, lawyers that deal with contracts and have to work on various business deals provide value for corporations in analyzing if a contract is valid and if it makes financial sense to the company. There are other groups of lawyers that provided value as well.

With the number of LSAT applicants increasing and the number of law schools staying the same getting into law school will become even more competitive. A similar situation has occurred in the field of medicine as well (look for an upcoming blog about that). I would argue that we should have more doctors instead of lawyers.

Botax?

Today in the news I saw a story on possibly placing a 5% tax on cosmetic surgery. A few things come to mind when I heard this. First, why would Congress want to place a tax on a service that does so much good for society? Cosmetic surgery, is a positive thing that can not only increase self-confidence and appearance, but can produce benefits to the people affiliated with the patient. For example, if Susan feels uncomfortable about her crooked nose and decides to get a nose job not only does Susan benefit but her friends benefit in a small way by not having to glance at crooked nose. The same thing can be said for Susan’s spouse who although doesn’t mind the appearance of her nose believes Susan looks much better after her surgery. In addition to looking better, Susan’s husband notices she has more self confidence and is not as self conscious about her body like she use to be. Clearly, not only does Susan benefit but possibly her friends, significant other, and family might reap small benefits as well. In economics, this is known as a positive externality. In 2008, 12.1 million cosmetic procedures were performed (American Society of Plastic Surgeons). As I mentioned before not only are the people getting surgery benefitting spouses, boyfriends, girlfriends, and family members are benefitting from these procedures.

Taxing any good or service will always result in getting less of that good of service. Often government policies try to curb bad behavior. This is the reason taxes on products such as alcohol and cigarettes are so high. However, in this case there is no reason to tax cosmetic surgery.

In addition to this people always have to be aware of the law of unintended consequences. So let’s suppose Congress institutes a 5% tax on “cosmetic procedures”. Couldn’t doctors simply change the name from “cosmetic procedures” to “luxury procedures”? Wouldn’t a price increase lead consumers to seek out cheaper alternatives (doctors that were not board certified)? Since there would be a price increase couldn’t it lead surgeons to not perform as many surgeries which could lead to long lag times between surgeries which could potentially hurt their quality since I would imagine surgeons are at their best when they perform surgeries without a lot of lag time? By lag time I mean going weeks without performing an operation not a few hours. I think some of these questions need to be considered before anyone votes on this.

What's Going on With TCU?

TCU has seemed to have an incredible season thus far. With a record of 10-0 TCU is currently ranked number 4 in the BCS and the AP Poll. This is exciting news not only for the football team but the TCU community. Attending TCU from 2005-2009 I noticed a new shift in the football tradition at TCU. Starting my freshman year TCU has consistently won and been bowl eligible every year. I give credit to coach Gary Patterson who turned the football program from a second rate team to a nationally recognized team. This is not only exciting for TCU fans but the TCU community. I hope the recent success will draw more attention to the school and academics instead of simply being known as a "football factory". TCU is always ranked within the top 100 schools in the U.S. News and World Report and has an outstanding business program (I should know I graduated from it). The thing I miss about TCU is the small classes and getting to know professors. At larger schools this simply doesn't happen. For instance, a school might have Nobel Prize winning professors but good luck trying to get office hours with them. Hopefully, TCU will win its last two games and be eligible for a BCS bowl. I can truly say I am proud to be a Horn Frog.

Healthcare

Recently, the House and Senate have been voting on various bills for healthcare. Many people are for universal healthcare because they believe every has the “right” to healthcare access no matter if they live in the Hamptons or the South of the Bronx. While well intentioned politicians want to do the best for society there are obviously costs associated with giving healthcare coverage to everyone.

According to many sources 46 million Americans don’t have healthcare insurance. This number can be a little misleading. Many of these people can afford healthcare yet don’t purchase it either because they believe they are healthy and don’t need healthcare or don’t want to be burdened with the cost. Another large proportion of this 46 million can get healthcare through Medicare or Medicaid yet choose not to. With so many people without healthcare what should America do?

Health care costs have been increasing at a rapid rate for many decades. Healthcare costs have increased more than education, transportation, and even housing. Part of the problem is the way the system is set up. Currently, if you have healthcare insurance and go to your doctor most likely you will only pay the co-pay (relatively cheap). In cases of catastrophic events the insurance company will cover the majority of your costs while you only have to pay a small percentage of the actual cost. The problem however is that healthcare insurance covers too many things. For instance, if you get a small cold and go to the doctor insurance will cover that when in reality the cold will most likely go away on its own. People also have an incentive to overuse healthcare since their employer is not paying for it and they aren’t. To say healthcare insurance is based on capitalism would not be entirely true. State governments heavily regulate insurance companies which make it illegal to cross state lines to purchase health insurance. If consumers were able to purchase their own healthcare there would be much more competition which would led to insurance companies competing for customers based off price and the type of coverage.

Competition could apply to the people that couldn’t afford healthcare insurance as well. These people could receive vouchers so they could purchase healthcare from where ever they would like which would create competition between doctors and healthcare providers. I think it’s interesting that I can go online and search the price for a plasma TV, stereo system, or DVD player but I can’t research what the cost of a MRI scan. Health insurance needs capitalism and not the current system of having employers pay for employees for which decisions are made by a third party.

Markets in Everything: Hair Loss

Over the past year or I have become interested in the market for hair loss. Looking at old pictures of family members and noticing some slight hair loss I wondered if I would have the hair loss gene as well. Millions of Americans lose their hair every year. Around 40 million men are affected by male pattern baldness. Male pattern baldness is what people typically think of a receding hair line. In addition to this, there can be loss of hair in the crown (also known as the vertex area).

Two people that have really influence my thinking are Dr. Sam Lam and Dr. William Rassman. Both are board certified hair transplant surgeons and take hair transplantation very seriously. Dr. Lam has posted numerous videos on YouTube, educating people on hair loss and hair transplantation, and does an exceptional job at taking complex ideas and turning them into simple understandable videos. From his videos Dr. Lam stresses the importance of education on the patient side. I completely agree with his approach. Why should you pay for anyone’s services unless you truly understand the value that you are getting? Remember knowledge is power. Dr. Rassman maintains a daily journal for hair loss (BaldingBlog) with close to 8,000 entries that answer hair loss questions. I commend both gentlemen for educating not only me but thousands of others.

What I have learned from my research is that hair loss occurs is primarily due to (Dihydrotestosterone). Genetics also plays a factor as well. From what I understand DHT plays a significant role in hair loss. The hair follicles shrink to a point where they can't be seen anymore. In essence, the hair follicles go through a miniaturization process where they can't be seen anymore. Dr. Rassman stresses mapping out the miniaturization process. Individuals can look at their own individual miniaturization process by purchasing a handheld digital microscope. Drugs such as Propecia and Rogaine try to slow down or reverse the miniaturization process. I should point out that both drugs were discovered by accident (Rogaine through blood pressure medication and Propecia through prostate medication). Although, there is no cure for hair loss Propecia and Rogaine are the only known proven methods that seem to preserve hair. The patent for Propecia expires November 2013 which should significantly decrease the cost. Avodart a drug commonly used for prostate problems has seemed to show promise in clinical trials. However, it should be pointed out that sterility was an issue in the trials for Avodart the drug currently not approved for hair loss treatment. What would be interesting though is if Avodart can help with BPH (enlarged prostate), hair loss, and increase sterility (less likely to have kids) wouldn’t it be the blockbuster drug for men over 50? I did a little research and wondered if DHT was a problem why not find a drug that greatly reduces DHT? A drug called acyline strongly reduces DHT to very low levels. Although, this approach might be extreme acyline is currently being studied for prostate cancer and sterility.

Aside from medical intervention hair transplantation is also another way to restore hair. Hairs are transplanted from the back of the head (genetically programmed not to be lost) and individually placed into the balding areas. The process can take hours and is very labor intensive. There is actually a voluntary group of hair transplant surgeons known as the International Society of Hair Restoration Surgery. These surgeons are well trained and knowledgeable in performing hair transplants.

I think it’s interesting how there is can be markets many things including hair loss. This industry still seems to be in a growing stage and has advanced so far in such a short period of time. Perhaps one day hair loss will be a thing of the past.

Below are the links for Dr. Lam and Dr. Rassman
www.hairtx.com
www.baldingblog.com

Organ Donation

While working out this evening I heard a very interesting podcast with Richard Epstein. Richard is teaches law at the University of Chicago and will be teaching at NYU next semester. Epstein is able to talk in whole paragraphs which is quite impressive. He clearly is an academic intellect and is a brilliant man. I sometimes think of him as a genius on steroids.

I was listening to an old EconTalk podcast dated June 5, 2006 where Russ Roberts (host) was asking Epstein his thoughts on the market of organ donation. Epstein pointed out that it really is a tragedy that people have to go on dialysis for many years waiting to receive a kidney transplant. Current laws prohibit people from selling their own kidneys. I believe this is a tragedy given so many people die each year waiting for kidneys. Also it should be noted that dialysis cost around $100,000 a year which obviously is not a cheap solution. The podcast discussed how people have some negative connotation to permanently dismembering their body and giving it away. Epstein quickly points out that people give away blood and sperm. Some type of system where people could pay for kidneys and trade them freely would be beneficial. People always claim that people would get taken advantage of if there were a free market for kidneys. Clearly, this is nonsense given it would be voluntary transaction. Currently, a black market exists for kidneys. Black markets only exist when markets are not working.

Nobel Prize winning economist Gary Becker has done work on this subject and suggests that, “according to Ortner (2005), the average cost of a liver transplant is about $335,000 in the United States.” Becker and the other author suggest that “a value well over $500,000 per person transplanted immediately after netting out total cost of kidney transplants, which include pay to donors”. If this were possible a market could be started for kidney transplant which inevitably would decrease the risk of death and risk associated with this type of procedure. If the government were to allow the transaction of kidneys doctors continually increasing the quality in addition to decreasing risk (think scales of economies). Isn’t it immoral to have tens of thousands of people dying every year when there clearly could be a market that could save lives and increase the wealth of certain donors?

Link to Becker’s work:
http://home.uchicago.edu/~gbecker/MarketforLiveandCadavericOrganDonations_Becker_Elias.pdf