That was one explanation in an NYT article on the limited use of direct injection of chemotherapy into the abdomen, even though there is clear evidence of this being an effective way to extend the life of ovarian cancer victims. The article notes that there has been some increase in the use of this method since the National Cancer Institute made a clinical announcement promoting its merits in 2006, but still only 50 percent of patients receive the treatment.
The piece offers the use of generic drugs, which don’t provide large profit margins as one explanation:
“Dr. Markman [the president of medicine and science at Cancer Treatment Centers of America] said that when a treatment involves a new drug or a new device, manufacturers eagerly offer doctors advice and instructions on its use. But this treatment involves no new drugs or devices, so no one is clamoring to educate doctors about it. They are on their own to learn, and to train their nurses, a commitment that will take time and money.”
This is an interesting, if tragic, example of the ways in which patent monopolies reduce the quality of health care. They push people towards the use of patent protected drugs even in situations where they may not be the most effective form of treatment. This problem is widespread, even if the consequences may not always be as serious.
That was one explanation in an NYT article on the limited use of direct injection of chemotherapy into the abdomen, even though there is clear evidence of this being an effective way to extend the life of ovarian cancer victims. The article notes that there has been some increase in the use of this method since the National Cancer Institute made a clinical announcement promoting its merits in 2006, but still only 50 percent of patients receive the treatment.
The piece offers the use of generic drugs, which don’t provide large profit margins as one explanation:
“Dr. Markman [the president of medicine and science at Cancer Treatment Centers of America] said that when a treatment involves a new drug or a new device, manufacturers eagerly offer doctors advice and instructions on its use. But this treatment involves no new drugs or devices, so no one is clamoring to educate doctors about it. They are on their own to learn, and to train their nurses, a commitment that will take time and money.”
This is an interesting, if tragic, example of the ways in which patent monopolies reduce the quality of health care. They push people towards the use of patent protected drugs even in situations where they may not be the most effective form of treatment. This problem is widespread, even if the consequences may not always be as serious.
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The NYT had an article reporting on Secretary of State John Kerry’s promotion of the progress made in reaching a final agreement between the twelve countries on the terms of the Trans-Pacific Partnership (TPP). At one point the piece quotes Kerry:
“No country can expect its economy to grow simply by buying and selling to its own people …. It is just not going to happen. It defies the law of economics. Trade is a job creator and prosperity builder, period.”
Of course no one is proposing that countries not trade, so this is sort of a bizarre counter-factual. It would be bit like responding to opponents of a highway plan by saying that people depend on cars to get around. The assertion doesn’t have anything to do with the merits of the highway, just as the fact that countries trade has nothing to do with the merits of the TPP.
As a practical matter it is entirely possible that the TPP will lead to less trade. The rules that the United States is trying to impose on patents and copyrights and other forms of intellectual property claims will lead to considerably higher prices for the protected items. For example, the hepatitis C drug Sovaldi would sell for less than $1,000 per treatment without protection, but sells in the United States for $84,000 per treatment with patent protection.
As a result of these higher prices for a substantial category of goods, the total volume of trade may actually be lower with the TPP than without it. For this reason, those who want to see more trade may have good reason to oppose the TPP. (The various studies that analyze the impact of the TPP have not incorporated the impact of higher prices due to stronger patent and copyright related protections.)
The NYT had an article reporting on Secretary of State John Kerry’s promotion of the progress made in reaching a final agreement between the twelve countries on the terms of the Trans-Pacific Partnership (TPP). At one point the piece quotes Kerry:
“No country can expect its economy to grow simply by buying and selling to its own people …. It is just not going to happen. It defies the law of economics. Trade is a job creator and prosperity builder, period.”
Of course no one is proposing that countries not trade, so this is sort of a bizarre counter-factual. It would be bit like responding to opponents of a highway plan by saying that people depend on cars to get around. The assertion doesn’t have anything to do with the merits of the highway, just as the fact that countries trade has nothing to do with the merits of the TPP.
As a practical matter it is entirely possible that the TPP will lead to less trade. The rules that the United States is trying to impose on patents and copyrights and other forms of intellectual property claims will lead to considerably higher prices for the protected items. For example, the hepatitis C drug Sovaldi would sell for less than $1,000 per treatment without protection, but sells in the United States for $84,000 per treatment with patent protection.
As a result of these higher prices for a substantial category of goods, the total volume of trade may actually be lower with the TPP than without it. For this reason, those who want to see more trade may have good reason to oppose the TPP. (The various studies that analyze the impact of the TPP have not incorporated the impact of higher prices due to stronger patent and copyright related protections.)
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This is an important piece of information that might have been worth including in a NYT article on premium increase requests by insurers in the state health exchanges. The Commerce Department reports that spending on personal health care services, which accounts for the overwhelming majority of health care spending, increased by 5.4 percent from the second quarter of 2014 to the second quarter of 2015. (The major item missing is prescription drugs, which did have a faster rate of increase.) This means that unless the insurers are facing a very skewed sample or they badly misunderstood the market, they should not need large premium increases to cover their costs.
This is an important piece of information that might have been worth including in a NYT article on premium increase requests by insurers in the state health exchanges. The Commerce Department reports that spending on personal health care services, which accounts for the overwhelming majority of health care spending, increased by 5.4 percent from the second quarter of 2014 to the second quarter of 2015. (The major item missing is prescription drugs, which did have a faster rate of increase.) This means that unless the insurers are facing a very skewed sample or they badly misunderstood the market, they should not need large premium increases to cover their costs.
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Actually, I want to skip over the minimum wage discussion (I’ll come back to it) to address another issue in his column this morning. In his prelude to attacking the $15 an hour minimum wage Samuelson takes a swipe at the economic policies of the 1960s:
“Consider the 1960s. Economists convinced themselves — and the public — that, through government budgets and interest rates, they could minimize recessions and sustain “full employment.” Early success was astounding. By late 1968, unemployment was 3.4 percent. But this was simply an inflationary boom, not a sophisticated advance in economic management. Double-digit price increases soon surfaced. We spent 15 years (and four recessions) combating inflation.”
This is close to incoherent. First, what does it mean to say “we spent 15 years (and four recessions) combating inflation.” If he means that we had people in Washington concerned about inflation, he should probably had said 40 years. Much of the Republican party has been yelling about hyper-inflation even as the inflation rate remains stubbornly below the Fed’s 2.0 percent target.
Does he mean inflation was a problem? Well perhaps it was higher than was desirable for much of the 1970s and the first few years of the 1980s, but that hardly makes it a crisis. After all unemployment has been higher than desirable (as measured by the Congressional Budget Office’s estimate of NAIRU) for most of the last 35 years. Furthermore, the four recessions line also doesn’t make any sense. We had four recessions in the fifteen years before 1960 also.
Furthermore, blaming the inflation on the 1970s on the policies of the 1960s is more than a bit bizarre. The more obvious cultpit would be the quadrupling of world oil prices in 1973-74 when OPEC first flexed its muscles and then again in 1979-1980 when the Iranian revolution shut off oil flows from what was then the world’s largest oil exporter. The sharp reversal of oil prices in the early 1980s, as more oil came on line and demand fell, was a major factor slowing inflation.
In fact, the 1960s were a decade of rapidly rising living standards for large segments of the population. Productivity was growing rapidly and most workers were getting wage gains in line with productivity growth, or close to 2.0 percent annually. That’s more than most workers have seen in the last fifteen years.
This brings us the Samuelson’s “minimum-wage madness.” In the period from 1938 (when the federal minimum wage was first established) to 1968 the minimum wage tracked productivity growth. This means that it not only kept pace with inflation, but minimum wage workers shared in the gains of the economy’s growth. If this pattern had continued, the minimum wage would be $18.42 an hour today.
Undoubtedly there would be large-scale unemployment if we were to try to quickly move to that wage today. Much has changed in the economy over the last 37 years and besides, it would take time for businesses to adjust. However the more modest goal of $12.00 by 2020 is certainly a reasonable target.
As Samuelson notes, there would be somewhat fewer jobs with this wage, but it is important to understand what this means. The jobs affected by the minimum wage tend to be high turnover jobs. People often hold them for only a few months at a time. In this context, fewer jobs will mostly mean that it takes people more time to find a new job when they leave another job or when they first start looking for work. That could mean that low wage workers get to work somewhat fewer hours over the course of a year than they would have liked, but when they do work they take home 65 percent more than if they were working at the $7.25 an hour minimum wage. Most would probably consider this a pretty good deal.
Samuelson is right that the minimum wage levels can be set too high where the loss of jobs more than offsets the benefits of the wage gains. Some cities may be moving into this territory now, but certainly the U.S. economy can support a minimum wage in 2020 that is more than one-third lower relative to productivity than the 1968 minimum wage.
Actually, I want to skip over the minimum wage discussion (I’ll come back to it) to address another issue in his column this morning. In his prelude to attacking the $15 an hour minimum wage Samuelson takes a swipe at the economic policies of the 1960s:
“Consider the 1960s. Economists convinced themselves — and the public — that, through government budgets and interest rates, they could minimize recessions and sustain “full employment.” Early success was astounding. By late 1968, unemployment was 3.4 percent. But this was simply an inflationary boom, not a sophisticated advance in economic management. Double-digit price increases soon surfaced. We spent 15 years (and four recessions) combating inflation.”
This is close to incoherent. First, what does it mean to say “we spent 15 years (and four recessions) combating inflation.” If he means that we had people in Washington concerned about inflation, he should probably had said 40 years. Much of the Republican party has been yelling about hyper-inflation even as the inflation rate remains stubbornly below the Fed’s 2.0 percent target.
Does he mean inflation was a problem? Well perhaps it was higher than was desirable for much of the 1970s and the first few years of the 1980s, but that hardly makes it a crisis. After all unemployment has been higher than desirable (as measured by the Congressional Budget Office’s estimate of NAIRU) for most of the last 35 years. Furthermore, the four recessions line also doesn’t make any sense. We had four recessions in the fifteen years before 1960 also.
Furthermore, blaming the inflation on the 1970s on the policies of the 1960s is more than a bit bizarre. The more obvious cultpit would be the quadrupling of world oil prices in 1973-74 when OPEC first flexed its muscles and then again in 1979-1980 when the Iranian revolution shut off oil flows from what was then the world’s largest oil exporter. The sharp reversal of oil prices in the early 1980s, as more oil came on line and demand fell, was a major factor slowing inflation.
In fact, the 1960s were a decade of rapidly rising living standards for large segments of the population. Productivity was growing rapidly and most workers were getting wage gains in line with productivity growth, or close to 2.0 percent annually. That’s more than most workers have seen in the last fifteen years.
This brings us the Samuelson’s “minimum-wage madness.” In the period from 1938 (when the federal minimum wage was first established) to 1968 the minimum wage tracked productivity growth. This means that it not only kept pace with inflation, but minimum wage workers shared in the gains of the economy’s growth. If this pattern had continued, the minimum wage would be $18.42 an hour today.
Undoubtedly there would be large-scale unemployment if we were to try to quickly move to that wage today. Much has changed in the economy over the last 37 years and besides, it would take time for businesses to adjust. However the more modest goal of $12.00 by 2020 is certainly a reasonable target.
As Samuelson notes, there would be somewhat fewer jobs with this wage, but it is important to understand what this means. The jobs affected by the minimum wage tend to be high turnover jobs. People often hold them for only a few months at a time. In this context, fewer jobs will mostly mean that it takes people more time to find a new job when they leave another job or when they first start looking for work. That could mean that low wage workers get to work somewhat fewer hours over the course of a year than they would have liked, but when they do work they take home 65 percent more than if they were working at the $7.25 an hour minimum wage. Most would probably consider this a pretty good deal.
Samuelson is right that the minimum wage levels can be set too high where the loss of jobs more than offsets the benefits of the wage gains. Some cities may be moving into this territory now, but certainly the U.S. economy can support a minimum wage in 2020 that is more than one-third lower relative to productivity than the 1968 minimum wage.
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And the Fed and corporate governance structures. That is the implication of his column where he describes the debate over inequality as a debate “between people who think you need strong government to defeat oligarchy and those who think you need open competition.”
Actually, his side in this debate thinks you need a strong government to enforce patent and copyright monopolies, jailing any potential competitors. It believes you need a strong government, in the form of a central bank, to slow the economy any time the demand for labor gives ordinary workers enough bargaining power to push up wages and demand better conditions from employers. And Brooks believes that the government should set rules for corporate governance that essentially allow top management to set its own pay, since it effectively controls the boards that set their pay.
It is these and other man-made rules that have given us an economy in which a very small segment of the population enjoys the bulk of the gains from the economic growth of the last thirty five years. (You can get more of the story in The End of Loser Liberalism: Making Markets Progressive.) All of these rules could easily be different. For example, we could rely on tax credits rather than patent monopolies to fund research along with more direct funding through entities like the National Institutes of Health (which is strongly supported by the pharmaceutical industry).
It is undoubtedly convenient for Brooks’ side to pretend that the rules put in place to redistribute income upward are simply the natural workings of the market, but it is not true. It’s unfortunate that the NYT can’t find a columnist who would defend these rules on their merits rather than make an absurd claim that they are somehow facts of nature.
And the Fed and corporate governance structures. That is the implication of his column where he describes the debate over inequality as a debate “between people who think you need strong government to defeat oligarchy and those who think you need open competition.”
Actually, his side in this debate thinks you need a strong government to enforce patent and copyright monopolies, jailing any potential competitors. It believes you need a strong government, in the form of a central bank, to slow the economy any time the demand for labor gives ordinary workers enough bargaining power to push up wages and demand better conditions from employers. And Brooks believes that the government should set rules for corporate governance that essentially allow top management to set its own pay, since it effectively controls the boards that set their pay.
It is these and other man-made rules that have given us an economy in which a very small segment of the population enjoys the bulk of the gains from the economic growth of the last thirty five years. (You can get more of the story in The End of Loser Liberalism: Making Markets Progressive.) All of these rules could easily be different. For example, we could rely on tax credits rather than patent monopolies to fund research along with more direct funding through entities like the National Institutes of Health (which is strongly supported by the pharmaceutical industry).
It is undoubtedly convenient for Brooks’ side to pretend that the rules put in place to redistribute income upward are simply the natural workings of the market, but it is not true. It’s unfortunate that the NYT can’t find a columnist who would defend these rules on their merits rather than make an absurd claim that they are somehow facts of nature.
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The Labor Department reported that the Employment Cost Index rose by just 0.2 percent in the second quarter. This brings the growth in the index over the last year to 2.0 percent. This undermines any claim that wage growth is accelerating.
With inflation still well under the Fed’s target of 2.0 percent as an average rate of inflation (not a ceiling), and wage growth remaining flat or possibly even falling, the Fed would have little basis for raising interest rates to slow the economy. With this most recent report it seems likely that the Fed will put off a rate hike until the end of the year at soonest.
The Labor Department reported that the Employment Cost Index rose by just 0.2 percent in the second quarter. This brings the growth in the index over the last year to 2.0 percent. This undermines any claim that wage growth is accelerating.
With inflation still well under the Fed’s target of 2.0 percent as an average rate of inflation (not a ceiling), and wage growth remaining flat or possibly even falling, the Fed would have little basis for raising interest rates to slow the economy. With this most recent report it seems likely that the Fed will put off a rate hike until the end of the year at soonest.
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Steve Rattner is right that the baby boom generation failed millennials, but he has the reason wrong. He argues that we failed the millennials because they may have to pay higher taxes to support our and their Social Security and Medicare.
It’s hard to see the story here. We baby boomers have to pay much more in Social Security and Medicare taxes than did our parents and grandparents. Did they do us some horrible injustice? We do enjoy higher living standards and longer life spans, so what’s the injustice if we pay another 2-3 percentage points of our wages in taxes? If there is some moral wrong here, it’s difficult to see.
On the other hand there is the real problem that most millennials are not seeing real wage gains. This has nothing to with Social Security, it has to do with the fact that baby boomers let incompetent Wall Street types run the economy for their own benefit. This crew gave us the stock bubble in the 1990s and the housing bubble in the last decade. They also have given us an over-valued dollar. This creates a trade deficit that makes it virtually impossible to get to full employment without bubbles.
The net effect of the Wall Streeters policies has been the weak labor market of the last 14 years, which along with other policies has led to the bulk of the gains from economic growth going to the top one percent. Baby boomers should apologize for this upward redistribution, but the burden of Social Security is a molehill by comparison. If so much money was not being redistributed upward, real wages would be rising by 1.5-2.0 percent annually, taking 5-10 percent of these wage gains to cover the cost of longer retirements would not pose any obvious problems.
Addendum
I should have also pointed out that Rattner repeats the nonsense claim that Social Security could save any substantial amount of money by taking away benefits from wealthy seniors. If we define “wealthy” to be a non-Social Security income of $80,000 per person (less than half the cutoff for “wealthy” when President Obama raised taxes in 2013), the program could save just over 1 percent of its spending by phasing out benefits for higher income individuals. While it is possible to get lots of money by taxing rich people, it is not possible to get much money by taking away their Social Security since they don’t get much more than the rest of us. Rattner’s plan can only save much money for the program if he wants to take away benefits from middle income people.
Steve Rattner is right that the baby boom generation failed millennials, but he has the reason wrong. He argues that we failed the millennials because they may have to pay higher taxes to support our and their Social Security and Medicare.
It’s hard to see the story here. We baby boomers have to pay much more in Social Security and Medicare taxes than did our parents and grandparents. Did they do us some horrible injustice? We do enjoy higher living standards and longer life spans, so what’s the injustice if we pay another 2-3 percentage points of our wages in taxes? If there is some moral wrong here, it’s difficult to see.
On the other hand there is the real problem that most millennials are not seeing real wage gains. This has nothing to with Social Security, it has to do with the fact that baby boomers let incompetent Wall Street types run the economy for their own benefit. This crew gave us the stock bubble in the 1990s and the housing bubble in the last decade. They also have given us an over-valued dollar. This creates a trade deficit that makes it virtually impossible to get to full employment without bubbles.
The net effect of the Wall Streeters policies has been the weak labor market of the last 14 years, which along with other policies has led to the bulk of the gains from economic growth going to the top one percent. Baby boomers should apologize for this upward redistribution, but the burden of Social Security is a molehill by comparison. If so much money was not being redistributed upward, real wages would be rising by 1.5-2.0 percent annually, taking 5-10 percent of these wage gains to cover the cost of longer retirements would not pose any obvious problems.
Addendum
I should have also pointed out that Rattner repeats the nonsense claim that Social Security could save any substantial amount of money by taking away benefits from wealthy seniors. If we define “wealthy” to be a non-Social Security income of $80,000 per person (less than half the cutoff for “wealthy” when President Obama raised taxes in 2013), the program could save just over 1 percent of its spending by phasing out benefits for higher income individuals. While it is possible to get lots of money by taxing rich people, it is not possible to get much money by taking away their Social Security since they don’t get much more than the rest of us. Rattner’s plan can only save much money for the program if he wants to take away benefits from middle income people.
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I’m not kidding, this is what he criticized Senator Bernie Sanders for in a Vox piece today. He apparently views it as outrageous that Sanders, a candidate for the Democratic presidential nomination, doesn’t think that the United States should open its borders so that every person who in the world who wants to come and work in the United States has the opportunity to do so.
On the one hand Matthews has a point, there is an injustice in that people who were born in the United States are able to enjoy a better and longer life than people who had the misfortune to be born in a poor country in Africa, Asia, or elsewhere in the developing world. On the other hand, it is hard to see that as a greater injustice than saying that people who were born in wealthy and educated families in the United States, that could give their children the wealth and social training to enjoy a high living standard, have a right to a better standard of living than children who were born to less privileged families. Of course these children of privileged families will benefit from having more less-educated immigrants in the country since it will mean they have to pay less for their nannies and to have their lawn mowed and their house cleaned.
This problem can be solved much more easily than worldwide inequality. For example, let’s eliminate the patent and copyright monopolies that redistribute so much income upward to these privileged children. Let’s alter the licensing restrictions that ensure doctors and lawyers get outlandish pay. (We can use a lot more immigrants in these areas and the gains are large enough to have repatriations of a portion so that the home countries of these foreigners benefit as well.) And we can have the Fed not raise interest rates to keep the less privileged children from getting jobs.
Anyhow, we all have to decide for ourselves which injustices we find most worth fighting.
I’m not kidding, this is what he criticized Senator Bernie Sanders for in a Vox piece today. He apparently views it as outrageous that Sanders, a candidate for the Democratic presidential nomination, doesn’t think that the United States should open its borders so that every person who in the world who wants to come and work in the United States has the opportunity to do so.
On the one hand Matthews has a point, there is an injustice in that people who were born in the United States are able to enjoy a better and longer life than people who had the misfortune to be born in a poor country in Africa, Asia, or elsewhere in the developing world. On the other hand, it is hard to see that as a greater injustice than saying that people who were born in wealthy and educated families in the United States, that could give their children the wealth and social training to enjoy a high living standard, have a right to a better standard of living than children who were born to less privileged families. Of course these children of privileged families will benefit from having more less-educated immigrants in the country since it will mean they have to pay less for their nannies and to have their lawn mowed and their house cleaned.
This problem can be solved much more easily than worldwide inequality. For example, let’s eliminate the patent and copyright monopolies that redistribute so much income upward to these privileged children. Let’s alter the licensing restrictions that ensure doctors and lawyers get outlandish pay. (We can use a lot more immigrants in these areas and the gains are large enough to have repatriations of a portion so that the home countries of these foreigners benefit as well.) And we can have the Fed not raise interest rates to keep the less privileged children from getting jobs.
Anyhow, we all have to decide for ourselves which injustices we find most worth fighting.
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