Current Healthcare Debate

With President Obama and the recent healthcare summit it seems clear that nothing will get done in terms of healthcare. Although, this may seem bad it could be good for several reasons. I had not read the enormous bill is 1,990 pages long filled with 400,000 words. I don’t know about you but I don’t know how any politician has time to read that (I guess that’s what interns and aides are for). The House bill has an estimated cost of $894 billion over a 10-year period. My gut tells me the cost will be more than this but we can put that aside for now.

The problem with healthcare insurance is that it isn’t a consumer driven market. The problem with health insurance is that it covers everything that can happen to an individual which leads people to overuse it. For example, if the cost to go to the doctor is only $30 with insurance then people will continue to go to the doctor whenever they feel sick even if it really isn’t an emergency. One solution for this would be to just have insurance for catastrophic events just as a serious illness, surgery, or cancer. Car insurance works relatively well. Our car insurance doesn’t cover the cost of gasoline rising or allows us to change the color if we don’t like it.

Another serious problem is competition. State mandates don’t allow Americans to buy health insurance across state borders. I really don’t understand the logic behind this. If consumers were allowed to buy health insurance in different states it would bring down the cost of health insurance.

Many people talk about how many people die due to lack of healthcare coverage. A Harvard study, estimated that 45,000 people a year die from this. This is around .00148% of the entire population. More people die from fatal car accidents than die from lack of medical coverage. Why not make the speed limit 5 mph? Clearly, something has to be done about the uninsured. I would be in favor of a voucher system that would allow “qualified” people to get healthcare wherever they choose. This would create competition and force doctors to compete on costs and quality of service.

Speaking of doctors why are we limiting the supply of doctors. I mean why does the American Medical Association have a cartel on who can practice medicine? Why not have a voluntary system of people who want to help other people. We have voluntary associations for other professions.

In a related note why not decriminalize all prescription medication. If someone wants to take 10 Vicodin are they really hurting me? The only problem I could see with this is if there were any externalities (if the drugs cause them to be impaired which led them to hurt someone). I have a feeling many doctors appointments are solely just to get a refill on prescriptions. People have more information than ever in today’s society about how effective drugs are and their side effects. The Federal Drug Administration (FDA) claims that they want to help save lives. If they were so concerned about saving lives why do they block the approval of drugs that could save hundreds if not thousands of lives? People are not as ignorant as government officials believe they are. Decriminalizing drugs would also bring down the cost of drugs as well since they would be sold in many more places. Also more research could be done by scientists which would lead to more breakthroughs and discoveries than currently take place. The problem with healthcare is free markets it’s because of the lack of free markets.

Libertarians The Real Elitist?

Reading a recent quote from Dr. Bryan Caplan a professor of economics at George Mason University I was wondering if libertarians truly are elitist. Here is the quote from Dr. Caplan, “In a modern democracy, not only can a libertarian be elitist; a libertarian has to be elitist. To be a libertarian in a modern democracy is to say that nearly 300 million Americans are wrong, and a handful of nay-sayers are right.” I am pretty sure I agree with this quote. What really is interesting is how the libertarian view seems to be the best of both worlds (economically conservative yet socially liberal). However, the mainstream does not seem to embrace this viewpoint and writes off libertarians as crazy or nuts.

I use to think Republicans were into cutting spending, lowering taxes, and having a strong defense system. However, after President George W. Bush I really don’t understand how this is the Republican message. Libertarians want to have a balanced budget, low and fair taxes, and not be at war. Yet people still seem to think that this ideology of setting things free can be dangerous.

Dr. Caplan’s quote is very true since libertarians are telling everyone else they are wrong (expect for libertarians). This is most likely why the libertarian party isn’t very large. It would be hard to get elected if you told everyone else they are wrong. Most elected officials get elected because they perform favors or tell people they can assist them in some form. With the growing deficit, political unrest, and a continued war the libertarian party might see a rise in membership since the Republican and Democratic Party have had issues. Can anyone say Ron Paul?

Take It To The Limit

I recently watched a documentary on Netflix called “MaxedOut”. The documentary was about how Americans are in debt and are struggling to pay their bills. The film shows different people from different backgrounds and follows their story of how they got themselves into debt. The documentary also shows debt collectors and I believe tries to label them as the bad guys for harassing people that don’t pay their bills. Let’s remember debt collectors harass people that are not responsible. Elizabeth Warren (then Harvard law professor) and now Chair of the Congressional Oversight Panel talked about the dire situation of how people simply can’t make their ends meet. I think the more important question is what kind of ends are they trying to meet? People don’t have to buy a larger house, nicer car, or a boat they really didn’t need. What happened to people being self-reliant and prudent?

If you tried to explain the concept of a credit card to an alien it could get complicated very fast. A credit card is normally used when people don’t have enough cash on hand to pay for certain items. In the past credit cards where used to purchase big ticket items. However, now people are usually credit cards to pay for a coffee at Starbucks or something on the 99 cent menu at McDonalds. Why don’t more people go on a cash diet? This could be quite simple. Every month you allocate money for certain purchases like transportation, food, clothing, and entertainment and put that money into an envelope. The rule would be you can only use how much is in that envelope and couldn’t use ATM, debit or credit cards. Another caveat would be you couldn’t mix and mingle funds from different envelopes. Whenever you bought something you could physically see and feel that money coming out of your pocket which might encourage savings. However, people don’t think like this. I guess people feel a sense to entitlement or just simply can’t defer gratification. Although, statistics show that in rough economic situations people do in fact become prudent. Data from the Bureau of Economic Analysis shows that savings rates are much lower in boom periods and much higher in recession periods. In the middle of 2005, when the economy was doing quite well the savings rate was around 1.5% of disposable income. Contrast this with the second quarter of 2009 when the savings rate reached 5% of disposable income due to the economic uncertainty. What we don’t know is much people really should be saving. Perhaps even saving 5% of disposable income is too low. Some of the reasons I think people might be “maxed out” is because they really don’t understand the full implications of paying interest if they miss a credit card payment. True, credit cards companies can charge 30% on a balance that isn’t paid but aren’t you the one that took out the credit card?

One criticism I had when watching “MaxedOut” was how the story was one sided. The documentary failed to show the reason people where in debt. The film sort of took the premise “Oh poor us and let’s condemn all these evil credit card companies”. A sad story was told in the film how two mother’s children committed suicide over mounting credit card debt. Clearly, this is tragic but where was the communication process between the parents and children that could possibly have prevented these tragic events. I do not believe credit card companies are evil. Credit card companies are there when people need them to buy things that people can’t afford. The idea that you can stick a little piece of plastic into a wall anywhere in the world and get cash is quite interesting and novel. People should understand that getting a credit card is voluntary. People should be responsible with a credit card just as they are with alcohol, food intake, or anything else that could be harmful. We have to remember there is no such thing as a free lunch.

Becker, Prostitution, and Crime

Recently I have been thinking about how crime and economics are related. Dr. Gary Becker is known for his work within crime and economics. Dr. Becker has also won a Nobel Prize in Economics for using economics to understand how criminals think. Becker argues that criminals like the rest of us are rational. Criminals have to weigh the benefits with the cost of robbing, stealing, or whatever other criminal activity is involved. If you were a criminal you have to divide your time between criminal behavior and legitimate behavior. Also, if crime is profitable criminals will continue to engage in theft, robbery, and other types of deviant activity. However, if a criminal could become harmed or killed in the act of performing a crime then they are less likely to commit a crime. John Lott Jr. has done extensive research in gun right and has shown that more guns do equal less crime. Becker believes that the crime rate can never be 0% however. Clearly, it would be very expensive to have cops and surveillance cameras on every corner.

Although, I would like to point there are some simple things America could do to reduce the crime rate. First, why not get rid of the minimum wage? If the minimum wage was repealed then more people would be working and making money which could impose opportunity costs on criminals since they could have a job (even if it was low paying) as opposed to committing crimes. Secondly, I would decriminalize all drugs (even prescription drugs). Since there is a black market for drugs the prices are artificially pushed up. According to the Druglibrary.org “the costs of marijuana, cocaine and heroin are about 100 times what they would be in a free market”. If these drugs were legalized the price would be pushed down which would decrease the incentive people to steal the drugs since they wouldn’t be worth as much. Prescription drugs should also be legalized. True, we might have more drug users but if these illicit drugs were legal we could study how to cure people that are addicted to these very drugs.

The FDA (Federal Drug Administration) regulates monitors, and controls, what drug and food companies say about their products. However, part of the problem is sometimes the FDA declines a drug due to certain side effects. Some of these drugs can be lifesaving however. Plus, people are not as dumb as the government believes. Legalizing prescription drugs would allow more drug testing and research and development to be performed which would lead to even better drugs. In addition to this, the price of drugs would also decrease because if drugs were sold in stores such as Walgreens or CVS the stores would have to be competitive driving down the price as opposed to insurance companies that decide what they should pay (if they pay at all) for certain types of drugs. Third, I would legalize prostitution. Recent research I have done has shown that the countries that have regulated legalized prostitution all have lower rape rates when compared to the United States. Prostitutes would also be less likely to be harmed since they could have legal protection if they went to the police. Also legalized prostitution would result in lower STD rates along with lower HIV and AIDS rates. Let’s assume prostitutes had to get a blood test ever month it would be widely known who had certain diseases and who didn’t. Right now this doesn’t exist because prostitution like the drug industry is an underground economy. Therefore, there isn’t perfect information. Some of these ideas I believe could work wonders in not only reducing crime but could also raise much needed revenue.

Economics can clearly be used for more than forecasting future GDP or what future interest rates might be. What is interesting is that economics can be used as a framework when dealing with type of issue that involves logic and critical reasoning skills.

McFat?

I first have to apologize for not blogging in quite some time. I have been busy with grad school and with all these ‘little” assignments. In the past few weeks I have thinking about of a lot of different things. One of them is health. It is widely known that Americans are overweight and/or obese. According to the CDC, in 2006 67% of Americans were overweight. What this also would say is that only 33% of Americans are not overweight which seems like a reasonable number but I have a feeling that the percentage of people becoming overweight has been increasing since the 1970’s. I recently watched Supersize Me (for the third time… in college you are pretty much forced to watch it in any type of nutrition class). I thought Morgan Spurlock had an interesting idea of going on a McDonalds diet for 30 days. In the end he gained around 25 pounds and had a total cholesterol level of 230. His cholesterol before he started the McDiet was relatively good. Also his liver was in bad shape toward the end as well. I thought one of the highlights of the movie was Dr.Siegel (the cardiologist) who told Morgan not to eat McDonalds for another year after this experiment. In the movie they said Morgan had consumed as much McDonald’s food as someone should in 8 years. The first point of the story is obviously not to eat fast food every day. Sometimes I wonder though about working professionals who eat out a lot or don’t make their own lunch. Not only all those extra calories will pile on but the cost of all those meals adds up. Making a lunch is not only healthier, but could save you close to $1000 per year ($4 per day in savings x 5 days per week x 50 working weeks per year).

What I find really interesting is that people spend so much on trying to lose weight without wanting to do any work. Liposuction, diet pills, and weight loss books were all created to seduce people into thinking that they could get obtain a healthy body without having to lift a finger. Clearly, losing weight takes hard work, consistently, and dedication. What I find really intriguing is that people make millions of dollars per year selling ideas on weight loss even though the concept of taking less calories than you consume is quite simple. The same principal can be applied to those that want to accumulate wealth. As long as you save more than you spend you will have a surplus and if you do this over many years than you can create wealth.

So what can people do to lose weight? The first thing people can do is stop drinking soda. A recent study showed that drinking soda can lead to an increase in pancreatic cancer. Water seems like a good alternative and doesn’t contain any calories. Also using a bowl to measure out to be able to physically see how much you are eating is important. Working out too is a great too. The American Heart Association recommends working out at least 30 minutes a day to decrease the risk of heart attack, stroke, and other heart related diseases. Hopefully, if we all make little changes in our diet/exercise program we can feel better, live longer, and enjoy all the fruits life has to offer.

Superman Spending

It looks like Shaquille O'Neal is not only a super star basketball player but also a superstar spender. Last year, it was reported that O'Neal spent his money on the following items:

$156,116 in mortgages on three homes
$31,299 in homeowners insurance
$3,345 in phone bills
$1,610 in lawn and pool maintenance
$12,775 in food
$1,495 in cable TV
$24,300 in gas
$6,730 in dry cleaning
$17,220 in clothing
$2,305 for pets
$110,505 in vacations
$26,500 for childcare

-It should be noted that Shaq also has property taxes, state taxes (he pays tax on more than one state because sports stars have to play tax in the state where the game occurs). Shaq’s salary is around $1.8 million per month. Right now he is spending close to $875,000 per month. The good news is that Shaq is probably making $200,000 a month even after spending all this money. Even though he is making over $20 million a year now my question is what will he do after he retires? Clearly, he can't keep up this type of spending. His accountant and financial advisor must be pulling their hair out when they see he is spending this much money.

Source:
http://www.theinsider.com/news/604990_Shaq_s_Personal_Spending_Habits_Obtained_My_Media

Market for Dating?

Recent advances in modern technology has provided us with great wonders. One of these great wonders has been the personal computer and internet. Starting in the early 1990's and growing expotentially since then the internet has made our lives: more fun, easier to live, and allows us to do more in less time. One unintended consequence might be online dating.

You wouldn't know it unless you watched "To Catch a Predator" but the internet has become a valuable tool for the dating world. With popular social networking websites such as Facebook, Twitter, and MySpace people can not only find long lost friends but also make new friends. Although, making friends in the "virtual world" may not seem real or authentic millions of people particpate in online dating. Launched in 2000 eHarmony matches men and women everyday based on questionaires that people fill out. The company has around 20 million users. What I find very interesting is that people will often pay for this service (a monthly user fee). In economics, this would be known as a transactions costs. However, isn't meeting people realtively easy? I guess there might be a burden for individuals who are either too busy, don't want to, or are just too scared to spend time looking for other people. To think that there is a true marketplace for members of the opposite sex is quite interesting. eHarmony reports that they marry around 236 people every day. Simple math tells us that this is over 86,000 couples per year.

The real question though is does eHarmony work better than the convential way of marriage? For instance for many centuries parents often selected possible suitors for their children often leaving little choice for the children. Before the internet people actually had to seek out members of the opposite sex. However, they were only limited to people they knew, friends their friends knew, or other connections. Now people can go online and actually find someone with similar interests. There is no empericial work on whether online dating sites produce "better" marriages than coventential ones. My best guess would be that eHarmony and other dating websites would produce better results because it makes the market more efficent.

Random Thoughts

1. I am glad Texas Tech got a new coach Tommy Tuberville (110-60 record) and has done well against top ranked teams.

2. Rachel Ray could easily fit in on Jersey Shore.

3. TCU will be so motivated they might get to the promised land.

4. Losing weight and saving money are simple ideas yet people make millions of dollars selling books about these topics.

5. Acyline might be the next contraceptive, although more studies need to be done to see if it is safe over the long term.

6. Why are there so many different fillers in the plastic surgery market? Off the top of my head I can name a few (and I am not even in the health profession industry!): Botox, Perlane, Dysport, Restylane, Juvederm

Mike Who?

Many of you have heard of the incident at Texas Tech were Coach Mike Leach "allegedly" placed player Adam James into a dark shed. No one really knows what happen. Although, no one knows all of the details I suspect a scenario like this took place.

Adam James was playing very little playing time and his father (Craig James) believed his son should have received more playing time. Craig James is an analyst for ESPN and is the color commentator for the college games. I believe that James kept putting pressure on Leach to try to help his son get more playing time. Leach most likely responded in his bizarre manor by placing Adam James in a dark shed even though James had recently suffered a concussion. Let's assume that James did every possible thing imaginable to deserve to get placed in the dark shed. Does it still make it right? My answer would be no. What is even more interesting is that Leach in a way took matters into his own hands refusing to listen to the team physician for medical advice.

This news should come as no surprise though. Leach is known as obscure, odd, and even bizarre tendencies. I remember when 60 Minutes interviewed Leach. Leach often did not speak in complete sentences, seemed to get sidetracked easily, and make weird metaphors. Texas Tech fans seem to embrace Leach with open arms. As a coach I must admit he has done some good. It should be noted that Leach’s bowl record was only 5-4. Also his winning percentage against Big 12 teams was barely 60%.

Leach signed an $11 million 4 year contract with Texas Tech right after Leach had a magical season with Michael Crabtree and Graham Harrell. I have a feeling Leach will go elsewhere but will not get as much as he did at Tech. Leach probably cost himself a few million dollars with this whole incident which probably could easily have been avoided. Until then Leach will be sticking with his motto, "If the dark shed fits, you must acquit".

Tiger's Bogey

So everyone has been talking about Tiger Woods this holiday season. One of the most widely known icons in the sports world has had his image severely damaged in such a short period of time. Tiger confessed betraying his wife and family. Hopefully, he will learn from these mistakes and not make the same mistakes again. What is interesting though is that Tiger is still the best golf player despite having numerous women on the side. How does Tiger do this?

Woods holds the record for most career earnings for the PGA. As of December 2009, he has made more than $92 million in earnings. In addition to his earnings Tiger had numerous endorsement deals that were worth around $100 million per year. Around October 2009, Tiger hit the $1 billion mark (not bad for someone who went to Stanford trying to get an economics degree) Not only has he made himself a lot of money he has also increased the wealth of Nike. In particular, Nike Golf which was basically unheard of before Tiger came onto the golfing scene is now a $600 million business. So how could the man that had money, fame, and power succumb to the power of one-night stands?

In a interview from 1998 with Larry King when asked about dating Tiger’s response was something along the lines of “Well I am busy so often playing golf so I really don’t have enough time to get to know someone really well”. If you were an international super athlete how much time would you have available to your family, friends, and loved ones? What seems obvious are trade-offs in life. There are trade-offs to everything in life. In this case, Tiger seemed to value other women more importantly than his family and wife. Now it seems as if Tiger is paying the price for his infidelities. It seems as if Tiger has more than an 18 whole course ahead of him.