At the least, I'm a science project. From the inbox:
One of our staff pharmacists will be giving a talk on insomnia to a group of regional health care providers in early October. She would like to use the image of your actigraphy report on your website at: http://www.env-econ.net/2013/01/results-from-my-actigraphy-report.html. The talk is educational; it is a non-commercial event; the graph is the only part of the website being requested. We are a nonprofit clinic system in [location]. I anticipate approximately 75 or so participants. How may we obtain permission?
Warning: Spoiler Alert below the jump. If you haven't read 'Inferno' yet, don;t read below the jump, I'm going to give away the plot and ending.
I recently finished reading Dan Brown's (author of The Da Vinci Code) newest book 'Inferno.' As a casual reader of the book, I found it entertaining. Brown does his typical job of keeping the action moving, mixing in some interesting conspiracy theories, making me want to visit some cities I've never been to, and making it seem like being a college professor might be cool (although I have my doubts). I didn't enjoy it as much as The Da Vinci Code, which I didn't enjoy as much Angels and Demons, but still a good read (and I refuse to accept that The Lost Symbol was written).
But, as an economist, I found the book to be complete nonsense.
Raising the price of a calorie for home consumption by 10 percent might lower the percentage of body fat in youths about 8 or 9 percent, according to new research from the National Bureau of Economic Research.
I think... the main cause of the upward trend in
weight in the U.S...FOOD IS CHEAP and getting cheaper. I present as
exhibit A the graph on the right.
The graph maps the relative price of food (as measured by the BLS
Consumer Price Index for all food realtive to the overall CPI for all
goods) from 1980-2005. As you can see, food prices have fallen
dramatically since 1980 relative to other goods. The economist in me
says "Hmmmm...food is getting cheap relative to other goods, maybe
people are eating more." But the story gets better.
If we look at the price of 'fats and oils', 'sugar and sweets' and
'fruits and vegetables' relative to 'All foods', again we see a not so
surprising result (see the other graph to the right). The
prices of fats and sweets have fallen since 1980 relative to all foods
while the prices of fruits and vegetables have risen dramatically.
So why are people gaining weight? Sure part of it might be genetic
or social or environmental, but I think it's equally plausible that the
reason is economic. If the price of food falls relative to other goods,
and the price of fatty and sweet food falls relative to other foods,
what would you expect? People will substitute eating fat and sweet
foods for more expensive alternatives like eating fruits and vegetables
Why do we care? The CDC estimates that Medicaid and Medicare
expenditures for overweight and obese people were between $25 and $50
billion in 1998. Can anyone say 'Fat Tax'? I'm now ducking.
systems and regulators are debating where to best put limited funds to
improve safety: on upgraded signal systems or on structural repairs.
"The effort to calculate the value of lifesaving is a growing area of
research among regulators and economists alike, says Michael Livermore
of the Institute for Policy Integrity at New York University's School of
Law. The research enables "finer distinctions" about the cost that
society is willing to bear to lower risks, he says.... In the past, to
calculate the value of saving a life, the government used the value of
the wages a person would have been expected to earn over the remainder
of a lifetime, says W. Kip Viscusi, a professor at Vanderbilt University
who consulted with the Reagan administration to overhaul life
valuations in the early 1980s. At Mr. Viscusi's urging, the federal
government adopted a measurement known as the "value of statistical
life," or VSL-roughly speaking, the amount of money Americans find
reasonable to spend for a given reduction in the risk of death. The
switch to VSL raised the dollar value on preserving a human life. Among
other things, that made costlier safety regulations easier to justify on
economic grounds.... To calculate the value of life for a given
government regulation, agencies use wage, consumer-purchase and
job-safety data to calculate the premium already built into economic
data to account for relative riskiness. So economists deduce from
people's willingness to pay for safety features-say, air bags-how much
they value lowering the risk of death."
CLASSROOM APPLICATION: Students
can discuss the determination of the total expenditures, and allocation
of the money, to improve (rail) safety. The allocation of funds
between, for example, upgraded signal systems and structural repairs
depends on the marginal changes in the value of a statistical life
associated with each of the improvements. The total expenditures on
improvements in rail safety depends also on opportunity cost of the
QUESTIONS: 1. (Introductory)
The Southeastern Pennsylvania Transportation Authority (SEPTA)
identified a tradeoff in its expenditures to improve rail safety. What
is the tradeoff?
2. (Advanced) Suppose SEPTA allocates a
fixed amount of funds to safety improvements. In allocating these
funds between signal improvements and rail maintenance, SEPTA's goal is
to minimize the expected value of lives lost from train accidents. In
optimally allocating the funds, does SEPTA equate the decrease in the
expected value of lives lost associated with signal improvements to the
decrease in the expected value of lives lost associated with rail
3. (Advanced) What is the value of a
statistical life? Why is this criterion used in evaluating safety
programs better than the value of the wages a person would have been
expected to earn over the remainder of a lifetime?
Why was the federal government quick to adopt the value of a
statistical life as a criterion to evaluate the benefits of safety
I was reading somewhere recently--OK,OK, it was Reader's Digest again--that one way we could save a significant amount of gas is to lose weight. I don;t remember all of the details, but the logic was simple: On average, American's weigh about 20 pounds more today than they did 20 years ago. If we weighed the same as we did 20 years ago, our cars would be carrying aroun less weight and we all know that there is a weight/fuel consumption teade off holding all else equal, a lighter car consumes less fuel).
So, in true Env-Econ style, I thought I would do some quick, highly stylized, most likely innacurate, back of the envelope calculations--and then leave it to you to rip it apart.
From the organization that promotes fisheries in India comes this marine
monstrosity. Opened in February 2012, it has the unfortunate appearance
of a shark that has swallowed a blimp. The building’s left pectoral fin
doubles as an awning above the main entrance. At night, bluish-purple
spotlights pointed at the building give the impression it’s swimming
I'm really hoping so, as all of my other reasons for feeling superior to everyone else are disappearing gradually, like the setting sun:
Stanford University scientists ... concluded that fruits and vegetables labeled organic were, on average, no more nutritious than their conventional counterparts, which tend to be far less expensive. Nor were they any less likely to be contaminated by dangerous bacteria like E. coli.
The researchers also found no obvious health advantages to organic meats.
Conventional fruits and vegetables did have more pesticide residue, but the levels were almost always under the allowed safety limits, the scientists said. The Environmental Protection Agency sets the limits at levels that it says do not harm humans. ...
The conclusions will almost certainly fuel the debate over whether organic foods are a smart choice for healthier living or a marketing tool that gulls people into overpaying. The production of organic food is governed by a raft of regulations that generally prohibit the use of synthetic pesticides, hormones and additives.
The organic produce market in the United States has grown quickly, up 12 percent last year, to $12.4 billion, compared with 2010, according to the Organic Trade Association. Organic meat has a smaller share of the American market, at $538 million last year, the trade group said.
I'm a simple man. And by simple I mean I seek the simplest solution to complex problems. At times that means I miss the nuance and detail that is really at the heart of many complex problems, but that doesn't stop me from offering simple analysis.
So here's my economist take on the national health insurance, health care mandate, Obamacare, socialism...whatever...debate....
It's all about the risk pooling.
Insurance markets work when non-systemic risks are pooled across a population. Let's use car insurance as an example. For the most part, the probability of me getting in an accident is independent of the probability of you getting in an accident unless you happen to be driving next to me at 75 mph while I eat a Whopper with one hand and check my Facebook status with the other. By pooling the independent risks, insurance companies can offer relatively low priced insurance against one or the other of us getting in an accident. So states require (mandate) that in order to drive, you must have insurance, thereby reducing the external costs of my bad habits on you. If you don't have insurance, you aren't supposed to drive and if you are caught driving without insurance you face stiff penalties. The result: Users of the product that causes the risk (driving) have insurance--most of the time. You can choose not to buy insurance and not drive.
So what about healthcare? Shouldn't it work the same way? In theory, yes. Users of health care could be required to buy insurance against catastrophic outcomes. By pooling the risks across large populations, the individual cost of health care will be lower than the expected cost to you if you bore the full risk of your own health. Risk pooling reduces costs and protects againsts catastrophic outcomes. And, just as with car insurance, if you choose not to buy health insurance, you lose the right to consume healthca...oh, wait.
Human decency has to be factored in.
In the absence of health insurance, individuals can still not be denied health care (at least emergency care, which is expensive). So what happens when an individual chooses to forego health insurance? The cost of the uninsured care, guaranteed by human decency, gets rolled into the premium of those already insured. In other words, health care costs rise. Further, if individuals know that health care will be provided regardless of the willingness or ability to pay or willingness or ability to be insured, there is a perverse incentive to underconsume health insurance and further reduce the size of the risk pool in the insurance market (we call that moral hazard).
So what are the possible solutions?
Rely on people to 'do the right thing.' But each person's definition of right might be different. While I think it is right to participate in the insurance market, others might think it is right to take advantage of the rules of the game. And as we know, economic incentives are powerful things.
Have the government act as the insurer of last resort. This is the model we currently have. The government offers subsidized insurance for those who are unable to afford health insurance (medicare/medicaid) and then acts as the insurer of last resort for the unisured. The result: the cost of providing insurance to the uninsured and underinsured are passed on to the insured through higher taxes and higher insurance premia.
Mandate that everyone buy health insurance and play by the same rules, and penalize those who opt out. The results 'should' be more efficiently priced insurance premia for those already insured, reduce costs of providing health care to those unable to afford insurance, and a less morally hazardous (I made that up) risk pool.
"This blog aims to look at more of the microeconomic ideas that can be used toward environmental ends. Bringing to bear a large quantity of external sources and articles, this blog presents a clear vision of what economic environmentalism can be."
... the Environmental Economics blog ... is now the default homepage on my browser (but then again, I guess I am a wonk -- a word I learned on the E.E. blog). That is a very nice service to the profession. -- Anonymous
"... I try and read the blog everyday and have pointed it out to other faculty who have their students read it for class. It is truly one of the best things in the blogosphere." -- Anonymous