The Baumol Effect on Schooling and Medicine

Alex Tabarrok with colleagues has done some research on the rising costs of healthcare and schooling and written a book available free online. Why Are the Prices so D*mn High.

He also did a blog post on the The Baumol Effect on Schooling and Medicine.

My comments:

What he says and seems correct to me is that the marginal cost of healthcare and schooling has gone up, and yes Government subsidies have made it worse. I think he is saying is that we are buying more healthcare beyond the growth in productivity. Some people assume that there is no productivity growth but there is, but we are spending more because we have more to spend and we desire to spend more so total spending is rising.

This hypothesis merges nicely with Robin Hanson's idea that we buy more healthcare in part to show how much we care, so we are now buying healthcare beyond the point where it even improves health, just because we want to spend more to show how much we care.

So in schooling, today we have youtube and easily available educational videos with great teachers available for free, which is great productivity growth, but if a live teacher helps even a tiny bit over an online lecture we are willing to pay for it and so spending is rising.

A few examples of this in action is:

The great economist Alan Bennett Krueger's research showed no benefit of Ivy league schools over state schools but parents are willing to pay big bucks to get there child in and through Ivy league schools. (I think so they can get a little more to brag about.)

Even in k-12 people spend more to get a home in a good school district even though it seems to make little difference in measurable educational attainment. 

In healthcare we'll pay a lot to get the MD we want, and if a live MD is perceived as giving any benefit at all over telemedicine we will pay for it.

Also they will screen fragile 85 year old women for breast cancer etc. even though any treatment is likely to kill the patient.

If you wanted to improve poor people's health there are much better places to do that more and better police, safer cars, than access to healthcare yet there is a big push for more healthcare.

Venezuela, Crime and Poverty

I don't know whether to believe the story or not (It is an AP story) but if it is true does it say anything about poverty and crime and causality?

The feared street gangster El Negrito sleeps with a pistol under his pillow and says he’s lost track of his murder count. But despite his hardened demeanor, he’s quick to gripe about how Venezuela’s failing economy is cutting into his profits.
Firing a gun has become a luxury. Bullets are expensive at $1 each. And with less cash circulating on the street, he says robberies just don’t pay like they used to.
For the 24-year-old, that has all given way to a simple fact: Even for Venezuelan criminals it’s become harder to get by.
“If you empty your clip, you’re shooting off $15,” said El Negrito, who spoke to The Associated Press on the condition he be identified only by his street name and photographed wearing a hoodie and face mask to avoid attracting unwelcomed attention. “You lose your pistol or the police take it and you’re throwing away $800.”
In something of an unexpected silver lining to the country’s all-consuming economic crunch, experts say armed assaults and killings are plummeting in one of the world’s most violent nations. At the Venezuelan Observatory of Violence, a Caracas-based nonprofit group, researchers estimate homicides have plunged up to 20% over the last three years based on tallies from media clippings and sources at local morgues.
Officials of President Nicolás Maduro’s socialist administration have drawn criticism for not releasing robust crime statistics, but the government on Tuesday gave the AP figures showing a 39 percent drop in homicides over the same three-year period, with 10,598 killings in 2018. Officials also report a fall in kidnappings.
The decline has a direct link to the economic tailspin that has helped spark a political battle for control of the once-wealthy oil nation.

I once read a UK police official who said crime goes up when the economy is good because people drink more.

Some democrats used to contend that the way to reduce violence directed at the USA from the middle east was to stop buying petroleum, presumably so they would be so poor that they could not buy tickets to fly to the USA. BTW I never believed that idea and still do not.

The News Media's Main Goal to to Attract Eyes for Advertisers

Always keep in mind that the News media's main goal to to attract eyes for advertisers. Better to read the academics who actually study the subject. BTW If you think the academics are all far leftists nuts it is because of the reporting of News media, most of the academics are down to earth in their area.

My guess is that you’ve heard that famous result from a recent Federal Reserve survey of Americans: Four in 10 adults in 2017 would either borrow, sell something, or not be able pay if faced with a $400 emergency expense. That’s the exact wording of the Federal Reserve Board’s report of the results of its survey.

...

Question EF3. Suppose that you have an emergency expense that costs $400. Based on your current financial situation, how would you pay for this expense? If you would use more than one method to cover this expense, please select all that apply.

Check the results as reported in the Appendix or as reported by Reynolds. (He reproduces their table.) 36 percent of people answered “Pay it on my credit card and pay it off in full at the next statement.” That would be my option: I want the air miles. 50 percent of people answered “With the money currently in my checking/savings account or with cash.” We can’t simply add these two numbers to get 86 percent because the survey, as noted, gave people the option of using more than one method.

So here are some headlines reporting on this:

CBS:

Nearly 40% of Americans can't cover a surprise $400 expense

CNN:

40% of Americans can't cover a $400 emergency expense

CNBC:

Millions of Americans are only $400 away from financial hardship.

Fox Business:

Shocking number of Americans can't cover $400 surprise expense

Bloomberg:

Almost 40% of Americans Would Struggle to Cover a $400 Emergency

NY Times:

Many Adults Would Struggle to Find $400, the Fed Finds

 

Better to read the academics who actually study the subject. If you think the academics are all far left nuts it is because of the reporting of News media, most of the academics are down to earth in their area of expertise though outside their area they tend to be a little leftist nuts because they read the media above.