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Tag Archives: cost

To Minimize Hospital Bacterial Infections, People Need to Wash Their Hands

Sometimes economics can involve a lot more than money.

My local hospital is engaged in a hand washing campaign. The problem is that physicians ignore the mandate, even more than nurses and other hospital personnel. Yes, a doctor is busy and a sink might not be nearby but studies show that even when hygiene is available, compliance is inadequate.

The economic problem? We have a negative externality. The doctor does not suffer. The parties from whom he acquired the bacteria on his hands were not affected. Instead, as with all negative externalities, uninvolved bystanders are experiencing the cost of the physicians’ behavior.

The economic solution: We have to increase the “cost” (defined economically as sacrifice) of the behavior.

  1. At one LA hospital, it simply was a computer screen-saver on all hospital computers with petri dish pictures of bacteria cultures taken from physicians’ hands. The pictures were described as sufficiently disgusting that many more doctors complied.
  2. A second solution at the LA hospital was to publicly identify non-washers during departmental meetings.
  3. Elsewhere, a sign that read, “Hand Hygiene Prevents Patients from Catching Diseases” increased hand washing.

With all 3 approaches, the “cost” of non-compliance went up. People tend to do less of something when the cost is higher.

What did not work? When a hand washing “posse” randomly gave $10 Starbucks cards to doctors “caught” washing, they willingly accepted the reward but the impact was insufficient. Signs and emails, Purell hand disinfectant everywhere…little success.

Still though, getting people to wash their hands is only half of the hygiene problem. More tomorrow on why drying our hands also matters.

Sources and Resources: Freakonomics had a wonderful podcast on the hand washing problem, they also wrote about it here, and this NY Times article provides more details about relevant academic studies. In addition, I recommend this superb New Yorker article from Atul Gawande on using checklists in hospitals to minimize mistakes.

A Hand Washing Flash Mob

Note: The Title of this post was slightly edited.

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How much should cities plan for the storm of the century?

Some thoughts today about predicting natural disasters.

Weeks before 308 people perished in L’Aquila from an earthquake, a government commission proclaimed the chance was slim that a disaster would occur. It did happen and now, the 6 scientists and single government official who made the wrong prediction were sentenced by an Italian court to 6 years in jail for manslaughter.

Can you imagine the unintended costs of the court’s decision? Worrying more about jail than accuracy, scientists might predict many more natural disasters. Or, researchers might just refuse to serve on government commissions.

By contrast, here in New Jersey, we are being told to prepare for a hurricane that might be a record breaker. Responding, people near the shore are boarding windows and evacuating. Throughout the state, supermarket shelves are emptying and offices are closing.

An accurate prediction? If the storm does what the models predict, it will arrive within 24 hours but no one is positive.

As economists, where does this leave us? It takes me to Frederic Bastiat. Too often people seem to think that storms can boost GDP through the extra purchases they entail. Commenting, 19th century economist Frédéric Bastiat, in his “fallacy of the broken window,” tells us that disaster recovery only replaces what we already had. Using the land, labor and capital on new projects is far more beneficial. I wonder if his fallacy also applies to disaster preparation.

Whether looking at an Italian earthquake or a US hurricane prediction, does the spending they create wind up as misleading GDP additions?

Sources and resources: I used this Reuters article for facts about the Italian court decision while this NY Times Op-Ed conveys extra insight. To read more about broken windows, this econlife entry on the 2011 earthquake in Japan and this econlib excerpt from Frédéric Bastiat are possibilities.

 

 

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Singapore's Expensive VW Passats

When a country’s economy is ranked the 2nd freest in the world, how do they manage auto congestion and pollution?

By auctioning a limited number of vehicle permits, Singapore makes owning a car very expensive. A VW Passat in Singapore could cost as much as the median price of a house in a US metropolitan area ($158,100).

The reason is demand and supply. On the demand side, there are lots of millionaires (17% of all households), unemployment is low, job security is high and businesses will make interest free car loans to employees. On the supply side, permits are limited. As a result, according to auction information on Bloomberg, the vehicle permit alone could cost you S$89,990 ($73,332.52).

In other words, Singapore creates a market in vehicle permits to control traffic congestion and auto pollution.

Sources and Resources: My thanks to marginalrevolution.com for the Singapore story and Bloomberg for the details. Also, here, Bloomberg reports the most recent price of the permit and here is the (astronomical) price of a VW Passat. Finally, to see why Singapore is categorized as a free economy when its political system is much more restrictive, you can look at the Singapore link in the Index of Economic Freedom.

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Walking along 56th Street in NYC, maybe a half block before 5th Avenue, I always see people on line. (New Yorkers say on line. Almost everyone else says in line.) They are waiting to enter Abercrombie & Fitch.

Usually we associate an economic cost with a line. Time wasted. Irritation. Inadequate customer service. For Abercrombie, though, it might be a benefit.

Researchers from the University of Chicago Business School concluded that total queue length conveys the value of a product. The longer the line, the better it must be. In addition, they found that the number of people behind you is crucial. If we are ahead of many others, feeling a sense of accomplishment, we attribute more value to our goal. In one example, the researchers actually found that when there are many people behind us, we also tend to spend more.

Amazing. A long line snaking for blocks at an Apple store. And most of us think about the value of the product rather than the long wait.

Our Bottom Line: Queues are all about cost and benefit. If the vendor enables us to perceive a benefit, then a line like the one at Abercrombie can become a competitive strategy.

If you just want to enjoy hearing about lines, this 99% invisible podcast is a pleasure. For a more serious read, here is the U. of Chicago paper.

And a final thought… wasn’t it the lines that brought down communism? But that is a different story.

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Having no inclination to climb Mount Everest, I have always been fascinated by its economic connection. Now, hearing that Prince Harry was considering the ascent as a part of his “Walking for the Wounded,” it reminded me that Everest is all about cost, benefit and decisions at the margin.

The money: Sherpas are your biggest expense. Costing as much as $100,000, they guide, carry and cook. With $500 a typical tip, one Time journalist added 2 yaks. In addition, gear could run close to $10,000 ($1,000 for a down suit and $300 for gloves are just the beginning). Add the permits ($10,000 minimum and more, depending on how many people), cell phone expense, airfare to Nepal ($1500 coach).

The Time: A daily workout regime is long and demanding. From squats to stairs to extreme procedures, getting in shape for Everest will cost many hours. For the climb itself, the acclimation process is gradual. Instead of a steady upward trek to the peak at 29,029 feet, climbers go up and down and up through a series of base camps that gradually accustom their lungs to the sparser air. I have read that it takes 6 weeks for the acclimation process and then 5 days to the summit.

Our bottom line? Defined as sacrifice, cost refers to more than money.

Into Thin Air by Jon Krakauer is a fascinating account of a disastrous expedition.

The Economic Lesson

Whenever climbers make health and weather decisions, they are weighing cost and benefit at the margin. Beset by lightheadedness, raging headaches, nausea, frostbite, and other maladies, they have to decide whether to proceed with the next stage. With questionable weather, to abort or not becomes the key issue.

Each decision either expands or contracts climbers’ margin of safety. Too large a margin and they don’t reach the peak. Too small and the danger is life-threatening.

An Economic Question: Defining cost as sacrifice, describe the “expense” of a recent decision.

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