• economic news summary and medical care prices

    The Problem With Priceless Medical Care

    Sep 9 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic History, fiscal policy, Government, Health Care, Regulation, Thinking Economically • 134 Views

    In 2013, several college students called 102 hospitals to see how much a hip replacement would cost for their fictitious grandma without insurance. Not getting many price requests, most hospitals were not sure how to respond. When the students finally got the information, the disparity was massive. The price ranged from $11,000 to $125, 000.

    In another study, researchers found appendectomies ranged from $1529 to $182,955. As for the emergency room, a study revealed that a visit for a headache could cost anywhere up to $17,421 but as little as $15. A sprained ankle? $4 to $24,110.

    You can see below how patient charges vary for four of the top ten emergency room diagnoses:

    accurate hospital prices

    From: “How Much Will I Get Charged For This?…”

    Trying to figure out some consistency, researchers found what one Harvard professor called, “…a total mess.” Not only did the prices at nearby hospitals with similar quality, demand and supply differ from each other but inside the same hospital, prices for the same procedures varied. It seemed to all depend on whether the payer was government or an insurance company, a foreigner coming to the U.S. for care or an uninsured individual.

    Where are we going? To why we need real prices.

    How to Price Medical Procedures

    One of several U.S. medical centers that has begun to calculate its real prices, the University of Utah Health Care has discovered that it’s not easy. You have to input a doctor’s time, staff time, equipment use, lab tests, drugs, cost per minute in the emergency room (82 cents), for orthopedic surgery ($12) and for surgical intensive care ($1.43).

    The list is endless–so far Utah Health Care has uploaded 200 million rows of costs. But it has already improved their decision-making. At Utah, they related cost and outcome and wound up spending where it counted more. As a result, in one surgical program, costs fell by 30 percent because they decreased patient complications.

    Our Bottom Line: Prices

    Think gasoline for a moment. Hearing a gallon of gasoline was $1.50 you would drive more; $4.50 a gallon sends the signal to drive less.

    With our medical system though, neither the supply nor the demand side knows real prices. You might be thinking that prices cannot send signals when we are dealing with our health. But Utah did get some better outcomes once it knew the prices of all it had to purchase.

    And as economists, we know we are always dealing with scarcity. Distributed more efficiently because of real prices, the limited land, labor and capital in our medical system can help more of us receive care that cannot be “priceless.”

    No Comments on The Problem With Priceless Medical Care

    Read More
  • economic news summary and long queues

    How To Stand in Line Less

    Sep 8 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic Humor, Tech, Thinking Economically • 152 Views

    Having just left Nantucket, I already miss the Juice Bar’s incredible homemade vanilla ice cream that I like to mix with their triple chocolate mountain (cookie dough, chocolate chips and brownies in chocolate ice cream). However, I will not miss the long evening lines that can stretch for more than a block.

    A small section of a Juice Bar queue:

    Better incentives for shorter queues

    From: Yelp

    According to researchers at the University of Southern Denmark, there is an alternative.

    Where are we going? To why the incentives for queues are all wrong.

    A Shorter Line

    If you observe traditional queue etiquette, the people who arrive early should get served first. The problem though is that the traditional way encourages us to arrive early. And the sooner more people arrive, the longer the line and the longer the wait.

    On the other hand, if Apple, for example, told everyone interested in a new iPhone that the last people who showed up would be the first served, no one would show up twelve hours before opening time with a sleeping bag. And the line would be much shorter. Or, as an economist alluding to a Nash equilibrium would say, LIFO (last-in-first-out) is welfare optimal for all parties.

    Our Bottom Line: Incentives

    Whether signing up online for Obamacare, buying concert tickets or going to Shake Shack, most of us figure out an arrival strategy if we expect a long line. When the early birds are more likely to achieve success, we have the incentive to design a strategy that moves us in front of the crowd by getting there before everyone else. Ironically then, we create a self-fulfilling prophecy because our approach creates the bottlenecks we hope to avoid.

    The solution? Change the incentives. With LIFO instead of FIFO (first-in-first-out) or even SIRO (service in random order), everyone is better off. But then, our social norm that says FIFO is fair will have to change.

    As for the Juice Bar, until LIFO becomes their rule, I guess I will continue buying several quarts of ice cream and their fantastic homemade waffle cones at 11 a.m. when they open. Then, while blogging during the evening, I make my own vanilla/triple chocolate mountain waffle cone.


    No Comments on How To Stand in Line Less

    Read More
  • economic news summary and migration

    The Most Popular States

    Sep 7 • Behavioral Economics, Businesses, Economic Debates, Economic Growth, Economic History, Economic Thinkers, Financial Markets, fiscal policy, Government, International Trade and Finance, Labor, Thinking Economically • 156 Views

    A life changing event like marrying, becoming jobless or changing employers could make us decide to move to another state.

    Where are we going? To the importance of being able to move.

    Where We Move

    Below, the Atlas Van Lines interstate migration map identifies the states with the highest percent of people entering and those with the highest proportion of leavers:

    Migration patterns in the U.S.

    And here are some facts from the map. Isn’t it interesting that North Dakota is #1? With the price of oil so much lower, I wonder if their inbound migration will reverse.

    Interstate migration leaders

    Why We Move


    As a “dollar zone,” the U.S. makes moving easy. So too does a single fiscal policy that provides the same Medicare and Social Security dollars, no matter where we live. The key is a shared monetary and fiscal environment.

    Looking at more specific reasons for interstate migration, researchers in a 2011 St. Louis Fed paper cited jobs most frequently. With only 28.2 percent of the jobless staying put, unemployment was important but changing employers and becoming employed also topped a reasons for moving list.

    The St. Louis Fed data below show the prevalence of jobs related reasons:

    interstate migration


    Scholars have debated whether taxes stimulate migration. One recent report says that taxes have little or no impact when compared to jobs, less expensive housing and weather (retirees). Disagreeing, a response says the contribution of taxes to a moving decision cannot be ignored when we look at the margin.

    In theTax Foundation map (below), you can see high and low income tax states.

    interstate migration

    Our Bottom Line: A National Market

    Easy interstate migration meant a national market could develop. Looking back to the 19th century, we had a transportation infrastructure of roads, canals and then railroads that moved people and goods. With midwestern farming, southern cotton and northeastern manufacturing, each of us could do what we did best and then trade. Because each section of the country was producing what it was most suited to, we enjoyed the benefits of comparative advantage.

    Now again we continue to enjoy the positive externalities of state-to-state migration. Being able to move freely across the vast expanse of the U.S.means households and businesses make production and distribution decisions that can allocate land, labor and capital most efficiently.

    No Comments on The Most Popular States

    Read More
  • labor markets and monetary policy

    Deciding if the Labor Market is Okay

    Sep 6 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic Debates, Economic Growth, Economic History, Economic Thinkers, Financial Markets, Government, Labor, Macroeconomic Measurement, Money and Monetary Policy • 193 Views

    Determining how to steer monetary policy, Federal Reserve Chair Janet Yellen reportedly has a “dashboard.” With indicators that relate to inflation, jobs, growth and markets, the dashboard lets her know when to brake and accelerate the economy.

    So, on this Labor Day Weekend, let’s see what the jobs indicators on her dashboard are telling her.

    Monetary policy and Janet Yellen's labor dashboard


    The Labor Dashboard

    Although the Great Recession ended in June 2009, still we are not entirely back to where we started. Yes, the job openings and layoffs/discharges rates and non-farm payrolls are back to normal:

    Monetary policy and labor dashboard

    All labor market infographics are from Bloomberg.

    However, the unemployment rate, the hires rate and the U-6 underemployment rate are not back to where they were six years ago:

    Monetary policy and Yellen's labor dashboard


    And the quits rate, long-term unemployed share and participation rate have more of a ways to go:

    Monetary policy and Janet Yellen's labor dashboard

    Our Bottom Line: Monetary Policy

    During an April 2014 talk, Dr. Yellen spoke about labor market slack. Oversimplifying, we can say she means we are underutilizing our labor force. The big question is how much the nine labor indicators reflect remaining recessionary slack. And the bigger question involves whether the slack is sufficient to delay a rate hike.

    No Comments on Deciding if the Labor Market is Okay

    Read More
  • The econlife.com economics news summary

    Weekly Roundup: From Uber Drivers to Gasoline Prices

    Sep 5 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic Debates, Economic Growth, Economic History, Government, Households, Innovation, International Trade and Finance, Labor, Lifestyle, Macroeconomic Measurement, Regulation, Thinking Economically • 162 Views

    Posts Roundup

    Economic news summary and the price of a life Sunday 8.30.15

    How to price a life…more

    Economic news summary and markets Monday 8.31.15

    When maple syrup is about more than pancakes…more

    Economic news summary and What Our Food Says About Us Tuesday 9.01.15

    What food says about a society…more

    Economic news summary and Rockets, Feathers and Gas Prices Wednesday 9.02.15

    Why gasoline prices fall slowly and rise quickly…more

    Economic news summary and uber drivers Thursday 9.03.15

    What to call Uber’s drivers…more


    economic news summary and  street messages Friday 9.04.15

    The economic messages sent from a street…more

    Ideas Roundup

    • production possibilities
    • tradeoffs,
    • regulation
    • cartel
    • supply and demand
    • markets
    • conspicuous consumption
    • consumption expenditures
    • Gini Index
    • inequality
    • framing
    • reference prices
    • monopolistic competition
    • monopoly
    • externalities
    • labor regulation
    • comparative advantage
    • creative destruction
    • GDP


    No Comments on Weekly Roundup: From Uber Drivers to Gasoline Prices

    Read More