Orszag on health cost containment

It's an issue that from the outside has appeared to have practically been buried amid other event, but this week's New Yorker gets OMB director Peter Orszag to talk about health insurance reform.

His chief perspective appears to be that the lack of much cross-sectional correlation between health spending and health outcomes in the U.S., as reported by the Dartmouth Atlas of Health Care, is evidence of suboptimal decision making or waste. In other words, if the more bucks you spend doesn't get you more of a bang, it's evidence you shouldn't have spent them. Not an unreasonable assertion to be sure, but also not one that is likely to go over easily with folks unaccustomed to the relatively raw logic of economic thinking.

Moms, infants, choices, and our knowledge

Judith Warner writes about breast feeding today in the Times, and she makes the important point that much of our knowledge about what matters for infant outcomes is circumscribed.

Informed consent from infants to participate in a scientific study, in which there are control and treatment groups, is inconceivable. We'll often never really know what a particular treatment in isolation really does to kids, because it would be unethical to find out.

I remember when the question of breast feeding came up among a group of health economists some time ago. While the prevailing wisdom seems to be that it's good, none of us knew of any science that could really sell anybody on it.

In terms of social welfare, a troubling aspect indeed is that breast feeding is much more costly for low-income moms. It would be nice to know the benefits with some degree of certainty.

Feel like moving for tax reasons?

It's only updated with state tax data through 2006, but the NBER's TAXSIM can still give you some insight about income tax rates you'll pay in different states. Gotta love that 3%+ New York City income tax!

Krugman on financial risk-taking

Today Paul Krugman points out a subtle point regarding improvements in financial markets' ability to diversify risk, through things like credit default swaps, etc. While hedging is often touting as spreading risk more evenly and reducing exposure, in fact it can also induce behavioral change. Namely toward more financial risk-taking, which may appear to be cheaper.

It's not clear to me that high-flying finance is anywhere near a thing of the past, as I think his column suggests. But I would agree that the events of the past several years certainly call for a reassessment of how we measure and manage risk.

Proximity to fast food and obesity

Today's Times reported on a new NBER working paper that finds increased obesity caused by the presence of fast food restaurants.

Currie et al. focus on 9th graders and moms, and what's great is that the effects of geographic proximity are indeed estimated stronger for 9th graders than for moms. You'd think that having fast food within your zip code, as opposed to just a little further away, might not matter a lot for folks with cars, and apparently that's somewhat true.

But if you're walking to the fast food restaurant, aren't you reversing some of the obesity effects? The issue is what's the treatment and control; if there are fewer fast food joints around, presumably those who would be walking to them would instead be walking to obtain healthier food alternatives in the counterfactual. But I wonder where 9th graders would otherwise be going than to fast food. Their counterfactual may be eating lunch at school, but then again, maybe 9th graders aren't allowed off campus and what we're really talking about is after-school eating and possibly dinners.

Looking at the study, you might also raise your eyebrows at the definition of what's fast food and why that matters. Are meals really healthier at IHOP and Applebee's than at McDonald's? But the story is more about calories per dollar, which is far higher at McDonald's.

Philanthropic giving, age, and immigration

Today's New York Times reports CUNY reached $1.2 billion in fund-raising three years ahead of schedule, which is described as a remarkable accomplishment for a "public system that historically attracted immigrants and working-class students."

One recent paper on the charitable giving of immigrants confirms that immigrant status tends to be associated with lower probabilities and levels of giving, but that once you control for wealth and other characteristics, the effect basically vanishes.

Although City University is a relatively old institution, parts of it are quite young. Queens College dates from 1937, while City, Hunter, Baruch, and Brooklyn are older. With considerable growth in the system after World War II, is it a surprise that charitable donations might not have picked up steam until a point where graduates were old enough to afford it?

Employer-sponsored default saving plans

Several days ago the Times ran an article about plans for universal tax-free savings accounts as mentioned by President Obama in February. It highlights the importance of having the default choice be to set up a savings account, which is a lesson from behavioral finance.

For those of us who switch employment frequently, however, it's a huge pain to keep track of all these accounts. Sometimes it's next to impossible to convince investment management companies even to give you access to your account in order to consolidate them. The article discusses that problem as well, and it's hard to know what a reasonable solution might be.