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Archive for December, 2010

Competition in (increasing) service quality doesn’t reduce costs:

Dane County’s two hospitals that deliver babies are each spending close to $40 million to spruce up maternity units and related facilities for a simple reason: Young women are key health care consumers, often deciding where their families will seek medical services for decades.

“If you don’t cater to women, you lose your market share,” said Kathy Kostrivas, Meriter’s assistant vice president of women’s health.

Many pregnant women tour both hospitals before choosing where to give birth, some bringing birth plans for each step of labor and delivery, said Holly Halberslaben, director of St. Mary’s family care suites.

“They really do their homework,” Halberslaben said. “It can be their first time in a hospital. You want to retain them.”

The somewhat buried exculpatory case for these investments is that the facilities have been operating near capacity, and the Madison area is the fastest-growing part of Wisconsin apart from some areas in the Twin Cities’ exurban fringe.  Nevertheless, the hospitals fairly evenly split a market of just over 7,000 annual births, so $80 million is not an insubstantial cost to recover.

I wonder how many expecting moms really are cross-shopping the facilities for compatibility with birth “plans.” [*] Many if not most of the births sort into the two hospitals on the basis of affiliations that send participants in several of the major local health insurance plans to one hospital or the other.  So even a modest amount of gold-plating can represent a large cost per birth on the contestable margin.  Granted, in addition to some Cadillac plan participants, the uninsured population has (Hobson’s?) choice as to where to give birth.  Though it’s messed up in a whole different way if the hospitals’ business plans would seek to recover a significant share of costs incurred to attract well-to-do moms to these facilities from the uninsured.

[*] When John was born, the plan was to have a healthy baby, which turned out to be the plan that was robust to complications that would have mooted any other plans.

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Maynard at Creative Destruction has the optimist’s take on the reported tax cut deal:

[T]he deal supposedly struck between Obama and the Republicans is not too bad and better than was to be expected. We give the rich about $60 billion a year, and in return get about as much economic stimulus, focused on low- and moderate-income people, as we could hope to get.

I observe that the Republican positions include permanent extension of all Bush tax cuts, permanent repeal of the estate tax, and no (or no net stimulus from) UI benefits.  So I tend to agree.   The best policy and politics would have been to allow the Bush tax cuts to expire and force their replacement with something that was less damaging to the government’s long-term finances, but as long as I’m dreaming I might as well ask for a pony.

What would solidify my position would be news of associated side deals for (a) a suitable increase in the debt limit, since it’s clear that deficits really don’t matter (certainly in the near term), (b) no government shutdown in the next Congress, and/or (c) no fair doom-mongering any cashflow shortfall for Social Security due to the payroll tax holiday.  Did I mention that pony?

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I was mulling this morning’s sucky employment report (which sucks, don’t get me wrong) and was curious as to the effects of the seasonal adjustment process.  You might expect a seasonal increase in non-farm payrolls for November from late holiday-season hiring, so it would make sense for the seasonal adjustment to knock the NSA figure down.  But how much?  Here’s the last three years of October-November employment change:

  • November 2008, NSA NFP -685K, SA NFP -728K, net adjustment -43K
  • November 2009, NSA NFP +80K, SA NFP +64K, net adjustment -16K
  • November 2010 (preliminary), NSA NFP +217K, SA NFP +39K, net adjustment -178K

There is, of course, no law of econometrics violated here.  The adjustment process is complex and doesn’t assume the effect is the same every year (a feature, not a bug).  For instance, the not-well-loved net birth/death adjustment is applied before seasonal adjustment and a note on the BLS website regarding the effect of the net birth/death model on seasonally adjusted payrolls basically says, “Don’t ask because we can’t tell you.”  So.  But still.

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The Great Hangover

Over at Angry Bear, Ken Houghton recommends Steve Randy Waldman saying that economists of the liberal-technocrat school shouldn’t too-hastily dismiss Austrian-style “hangover theory,” and in the event you happen upon this but not Ken’s post, so do I.  Waldman:

Austrian-ish “hangover theory” claims, plausibly, that if for some reason the economy has been geared to production that was feasible and highly valued in previous periods, but which now is no longer feasible or highly valued, there will be a slump in production. It wisely asks us to consider not only the prosperity we measure today, but the sustainability of that prosperity going forward…The Austrians focus on unsustainable arrangements of real capital, while the Keynesians focus on unsustainable arrangements with respect to money, debt, savings, and income. I think both approaches are fruitful.

Grant that “real capital” may include human capital and there’s a sense in which, say, the idea that some of our unemployment is structural is not totally wrong: marginally competent house-construction laborers and housing-finance paper-pushers had their bullshit jobs in the middle of the zilches thanks to the housing bubble, and are not liable to return to similar jobs unless someone stupidly reinflates that bubble.  This doesn’t mean that the liberal technocrats are wrong to point out that a lot of other unemployment is collateral damage to the bubble deflation.

I have one other nit to pick: Waldman decries “vulgar” make-work Keynesianism as a dead-end, observing that “effort is not production.”  That’s true enough, but it’s important to remember that there are worse things than paying someone to dig a hole and fill it back in — what the Econ 101 student might take as the gold standard of useless make-work.  In fact, we can (and do) pay people to dig a hole, fill it with something valuable, set the contents on fire, and then not fill the hole back in.  (I’m looking at you, Afghanistan!)  If anything, the stimulus spending via ARRA has avoided make-work to a fault, a bug in the original concept that may be a feature — as long as Chris Christie’s army doesn’t pass up too much free money — both for dragging out the actual spending and for leaving behind actual valuable public capital.

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