Malpractice Nonsense

In her book, Another Day in the Frontal Lobe: A Brain Surgeon Exposes Life on the Inside, neurosurgeon Katrina Firlik says:

"One reason physicians are so unhappy these days is that the definition of malpractice has changed. Malpractice is no longer defined as truly negligent or improper behavior. Now, a poor outcome alone triggers claims of 'malpractice.' The quality of care may be irrelevant.

I have never been sued, but expect to be. The entire new generation of surgeons expects to be sued...It doesn't matter how good you are or how carefully you practice."

Firlik distinguishes between medical errors that are inherent in risky procedures and errors that are the result of professional mistakes. Like anything else in life, medical procedures are not 100% reliable, even if performed or prescribed perfectly. Firlik points out that, in spite of everyone's best efforts, surgical procedures result in infection about 1% of the time.

Under the old definition of malpractice, plaintiffs could sue and win primarily only for professional mistakes. For example, if it could be proven that an infection happened because of a failure to follow standard procedure in sterilization.

Under the new definition, plaintiffs can sue and win whenever they get an infection, even though 1% of all procedures result in infection, in spite of a perfectly-executed surgery according to the most current medical standards.

When you combine this with America's cherished trial-by-jury system, it results in extraordinary legal payouts for plaintiffs, much of which goes to the lawyers. An example of where this is particularly true is in obstetrics, where the involvement of children can lead to emotional jury decisions and larger-than-normal payouts.

Former Senator and Vice Presidential candidate John Edwards made his career (and fortune) coaxing large financial rewards out of juries who blamed birth defects on doctors who botched deliveries.

A Boston Globe article from 2003 points out how Edwards' courtroom pleas for empathy (in the form of dollars) became near-legendary:

His summations routinely went beyond a recitation of his case to a heart-wrenching plea to jurors to listen to the unspoken voices of injured children.

"I have to tell you right now -- I didn't plan to talk about this -- right now I feel her, I feel her presence," he said in his record-setting 1985 lawsuit on behalf of Jennifer Campbell, born brain-damaged after being deprived of oxygen during labor. "She's inside me and she's talking to you. . . . And this is what she says to you. She says, `I don't ask for your pity. What I ask for is your strength. And I don't ask for your sympathy, but I do ask for your courage.' "

The result of the changing definition of malpractice, combined with an empathetic jury system is that doctors cannot risk practicing medicine without buying malpractice insurance. The premiums for this are, naturally, rising. According to this website,

"A survey on medical liability issues conducted in 2006 by the American College of Obstetricians revealed that approximately 90 percent of the obstetricians in the United States had been sued at least once. Of the approximately 10,000 obstetrician respondents, the average number of lawsuits over a career is between two and three...

Florida is the highest [malpractice] premium state, with base premium rates as high as $238,728 in 2008 for Miami and Dade Counties, followed by states that include Illinois, New York, Pennsylvania and Massachusetts."

So, who pays for this? When a plaintiff wins $2 million dollars in a malpractice suit, the doctor's insurance company makes the payment, which is split between many parties including the plaintiff (or plaintiffs), the lawyer(s), and others. The insurance company pays from its collected premiums. The premiums come from the many doctors using the insurance company. The doctors pay the premiums out of their salary (possibly with some help from their employer). The doctors or hospitals pass the cost on to YOU.

Another, indirect, financial cost of high malpractice awards is that they encourage "defensive medicine". Doctors, aware that a prosecutor might propose "what if?" scenarios to a jury, order extra tests and procedures to protect themselves from legal damages. What if Dr. X had ordered another sonogram or CT scan? Would that have saved the patient from these horrible consequences? But, Dr. X didn't do this, and therefore you, the responsible jury that you are, must declare that this doctor did not perform his professional duty! Never mind that these tests may rarely, or never, reduce the risk of the procedure, and that the machines required to perform these extra tests may cost millions of dollars, which is passed on to the patient in one form or another.

In addition to the financial costs, high premiums are leading to doctor shortages in some areas, where patients simply can't find an obstetrician. According to this May 2009 press release from the The American College of Obstetricians and Gynecologists:

Malpractice insurance costs have forced many obstetricians in New York to stop practicing obstetrics, refuse to care for high risk pregnancies, or leave the state...Many physicians are forced to give up obstetrics – or move to states that have appropriate and fair liability insurance rates...Eight New York counties have zero obstetricians: Essex, Greene, Seneca, Tioga, Washington, Yates, Schoharie and Hamilton. In addition, 18 counties have less than five practicing ob-gyns.

Insurance premiums are one of the reasons doctors in the U.S. require higher salaries than doctors in other countries, a statistic commonly cited in current debate on health care costs. However, other countries have taken steps to limit malpractice rewards. In Sweden, malpractice claims are handled by filling out a form, which is reviewed by a committee. In the UK, complaints are heard through the National Health Service, which avoids the lottery award system found in the U.S. Ironically, some have claimed that malpractice is less of a problem in the UK because the NHS is so inefficient and cash-strapped that people feel guilty suing them, even when the malpractice is very severe. (Example here) This bulletin from the American College of Surgeons explains how the Swedish system works, and that the primary opposition to such systems in the U.S. comes from a cultural expectation of very large awards for medical errors, from trial lawyers who would make less money, and resistance to making malpractice an exception to our trial-by-jury system.

Obama says everything is "on the table" when it comes to health care reform. Why isn't President Obama demanding reforms in malpractice insurance, which is part of everyone's medical costs? Perhaps it is because he is a lawyer, and feels empathy for others in his profession who might make less money under a reformed system? Perhaps it is because lawyers make up a large part of his donor base, and might stop contributing to his campaigns? Perhaps it is because he sees jury awards as a way to redistribute wealth from doctors who may have had advantages in life that the plaintiffs did not?

Our failed malpractice system increases the costs of health care in several financial and non-financial ways. These costs are passed on to you, through higher taxes, higher insurance premiums, higher deductibles, or other ways. "The government" doesn't pay for it. "The government" is the taxpayer, and the taxpayer is you. Obama says this is the time to fix health care. Let's do it.

Baltimore, Nancy Pelosi and Old Politics

Story A:

"A contractor named Dominic Piracci, who seemed to have a corner on the city's garage-building business, was convicted of fraud, conspiracy and conspiracy to obstruct justice. Piracci and Tommy had long been friends, even before Piracci's daughter, Margie, married Tommy D'Alesandro III.

Piracci had erased some names from his ledgers. Among the names deleted: Nancy D'Alesandro. On the witness stand in Piracci's trial, Nancy admitted getting six checks totaling $11,130.78 from Piracci. But she swore that $1,500 of it was a gift to their newly wed children, Tommy III and Margie. The rest. she claimed, Piracci lent her to pay off debts incurred in her feed business and a venture with a skin softener called Velvex."

Story B:

"On Tuesday, bakery magnate John Paterakis and City Councilwoman Helen L. Holton, a Democrat, were indicted for allegedly violating campaign finance rules stemming from a $6,000 check prosecutors say he wrote to pay for a political survey for the councilwoman.

Holton previously had been indicted for bribery in connection with the survey, but those charges were dismissed in May. Prosecutors are appealing the dismissal.

At least outwardly, city government appeared unfazed by the new indictments, with the city's Board of Estimates voting Wednesday morning to authorize about $500,000 in bond funds to improve streets near Paterakis' Harbor East development."

What do these two stories have in common?

In both stories, we have public officials accused of granting deals to developers on the basis of financial "assistance". Both stories took place in Baltimore City, the first one in 1954, the second in 2009. Both events were excused by many citizens at the time as just another day in Baltimore - Think about all the jobs that are being created!

Story B is from this week, as part of the latest indictment of current Baltimore mayor Sheila Dixon. Within the past year, Mayor Dixon has been accused of many things, including using thousands of dollars in gift cards donated to be given to the poor on personal expenses. In a separate case, when prosecutors were seeking evidence on whether the city was working with businesses that were restricted due to conflicts of interest, they couldn't find enough evidence. The head of the office in charge of maintaining the records, which were incomplete, is a personal friend and appointee of Dixon. Dixon's reputation is so bad that President Obama took back an invitation for Dixon to meet with him at the White House and more than 70 mayors.

In Story A, Tommy D'Alesandro III is Speaker Nancy Pelosi's brother; Nancy D'Alesandro is her mother. Her father, the late Thomas J. D'Alesandro Jr., aka "Old Tommy", was the mayor of Baltimore at the time. Much of the coverage of Pelosi's Baltimore past describes it as "rough and tumble" or some other terms that makes her sound wise and experienced. In November of 2006, the Washington Post ran an excellent story about Nancy Pelosi's roots in Baltimore, Maryland, where Old Tommy was mayor from 1947 to 1959.

One of Pelosi's first experiences in politics was screening requests for audience with her father. "When she wasn't racing to school at St. Leo's in her blue uniform or buying sweets in Mugavero's Confectionery or playing on front stoops up and down the block, Little Nancy sometimes worked the front desk at the family home at 245 Albemarle St., taking down the requests and sad stories of the folks who arrived to seek help from Big Tommy, her dad."

"Little Nancy" learned about the art of trading support and favors for political influence. "More than a civic duty, politics during her parents' day was about survival for the sons and daughters of Italian immigrants forging their way in a big city. It was about jobs. It was about favors of the political ward bosses. It was about patronage." As long as the mayor's actions were "good for the community", many people, including juries, were willing to look the other way.

Of course, these exchanges were not entirely free of controversy. "Big-city machine politics, no matter where it was practiced, often was a magnet for criminality. If a person betrayed the boss's loyalty, the consequences sometimes weren't pretty. Corruption often went with the territory."

From these beginnings, Nancy Pelosi has become one of the richest members of Congress, mainly through "investments". As Speaker of the House, she is the highest-ranking female politician in U.S. history and second in the line of presidential succession. (Hilary Clinton is fourth) She was nominated to be Speaker by Rahm Emanuel, the current White House Chief of Staff.

Now, if I were President Obama, looking for someone to implement new-style politics of hope and change, I might look for an outsider, someone with fresh ideas, to draft major legislation for me. However, Obama has delegated responsibilty for writing major legislation to Pelosi, whose roots are firmly planted in in the machine politics of Baltimore City, where the same politics rule that were in place 50 years ago. Pelosi seems more suited to implementing the same old politics nationwide than to putting aside the "old ways of doing business".

But, if Obama was looking for someone with knowledge of how to dole out government funds for "shovel-ready" construction projects, she seems to have plenty of experience with that.

America - what a country!

New Jersey canary in the U.S. coal mine?

44 people, including five rabbis, three assemblymen and two mayors, were arrested in New Jersey last week on various charges, related to public corruption and international money laundering. If these men are convicted, kudos to those who investigated these crimes, and perhaps risked their lives, to bring these men in.

In the wake of this scandal, Brad Parks, a former reporter with The (Newark, N.J.) Star-Ledger, wrote an article for this weekend's edition of the Wall Street Journal, titled "Poison Ivy in the Garden State", outlining the history of corruption in New Jersey government. According to the article, "it is generally accepted that, among the 50 U.S. states, only Louisiana compares with New Jersey in the pervasiveness of its corruption"

Although nobody is perfect and there are moral failings everywhere, Parks says the reason these kinds of scandals are so common in New Jersey is that Big Government is a catalyst for more corruption:

"The main problem...is that the state is enormously over-governed. In most states, the local unit of government is the county; in others, it’s the municipality. In Jersey, we have both, and lots of them. There are 566 municipalities—California, with four times the population, has only 480—and each has a mayor and/or councils. The 21 counties have their various freeholder boards and utility commissions and there are also 120 state legislators. When that many people have their hands in the cookie jar —and there are that many cookie jars—is it any wonder that you get people selling Oreos out of their trunk in the parking lot to make a little extra cash on the side?"

In other words, the more complex the bureaucracy, the harder it is to keep track of who is involved in what, and where the money is going. Thus, as our Federal government expands, expect corruption and scandal to expand along with it.

When Congress passes a 1,300 page cap-and-trade bill, including a 309-page amendment Waxman dropped in just hours before the vote, does anyone actually believe all members of Congress read and understand it, and that the government is able to track how the bill is executed? In this environment, does it even matter if Obama keeps his promise of posting all non-emergency bills online for public review? Do you have time to read a dense, 1,300 page bill?

Think about the economic stimulus bill. If a few billion of the $787 billion were to "go missing", what could anyone do about it? If "only" tens of millions were wasted or misappropriated, is our government going to tell us that it is understandable that 1 or 2% of such a large amount is acceptable, and that they will form a committee to make sure they catch those responsible? (I have someone in mind to nominate to such a committee - his name rhymes with Buck Borris)

Dealing with the complexities of government has become so difficult that Bill Ritter, the governor of Colorado, has been under fire for hiring expensive outside lawyers to handle the state's stimulus funds. "We needed deep legal expertise on the most complex federal legislation passed in decades, and we needed it quickly"(emphasis mine), according to a spokeswoman. Of course, there are no headline stories about the money spent in Washington to draft the insane bill.

Also, although President Obama is rhetorically against the proliferation of lobbyist dollars due to his belief that they corrupt poor innocent civil servants, it's striking how the recent, massive expansion of government through the bailouts, the stimulus bill, and possibly health care "reform" in the near future, is increasing lobbying (see Major Players Increase Their Spending in Lobbying Fight Over Health Care and Obama’s stimulus: The Lobbyist Enrichment Act).

All of this in spite of increased scrutiny and public disapproval. Now, I'm not saying that all of these lobbyists are corrupt, but the potential is there, and as the government becomes involved with larger and larger pieces of our economy, with billions of government handouts at stake, this is to be expected.

In his article, Parks also asks why so many in New Jersey are so willing to put their reputations and careers on the line, sometimes for $5,000 or less. "The only possible explanation is that the graft is so widespread, they figure they’ll never get caught", he says.

Let us "hope" the article exaggerates the problem in New Jersey, and let us pray that enough people get caught to prevent corruption from becoming as entrenched on a larger scale.

Krauthammer's "Why Obamacare is Sinking"

Some excerpts from Charles Krauthammer's column in today's Washington Post:

"What happened to Obamacare? Rhetoric met reality...President Obama premised the need for reform on the claim that medical costs are destroying the economy. True. But now we learn -- surprise! -- that universal coverage increases costs."

"This is not about politics? Then why is it, to take but the most egregious example, that in this grand health-care debate we hear not a word about one of the worst sources of waste in American medicine: the insane cost and arbitrary rewards of our malpractice system?...the greatest waste is the hidden cost of defensive medicine: tests and procedures that doctors order for no good reason other than to protect themselves from lawsuits...Tort reform would yield tens of billions in savings. Yet you cannot find it in the Democratic bills. And Obama breathed not a word about it in the full hour of his health-care news conference. Why? No mystery. The Democrats are parasitically dependent on huge donations from trial lawyers."

"The only thing he hasn't promised is to extirpate evil from the human heart. That legislation will be introduced next week."

Moon Landings, the Human Genome Project, Blue Pills, and Red Pills.

The 40-year anniversary of the Apollo landing was a reminder of the potential for great human achievement. In addition to the amazing feat of sending people to the moon, many technologies grew out of the program (some cool ones here) that may not have been developed had the U.S. government not made a massive investment in this "moonshot" project.

The anniversary also generated stories about other great achievements, including the mapping of the human genome. Although scientists have mapped the genome, "the work on interpretation of genome data is still in its initial stages. It is anticipated that detailed knowledge of the human genome will provide new avenues for advances in medicine and biotechnology," (emphasis mine) according to the Wikipedia entry. In the late '90s, there was a stock market bubble in biotech stocks (around the same time as the .com bubble), based on the massive potential of the project. Human Genome Sciences (HGS) was one of the companies riding the wave, rising from below 5 to over 100, then crashing again when investors realized real, marketable treatments were years, or decades, away.

Many medical treatments work on some people, but not others. Sometimes drugs work better on certain ethnicities or other identifiable characteristics, and sometimes not. For example, I take a daily pill for allergies. I have tried many different pills for the same symptoms. Some work better than others, but doctors can't predict with certainty which one will work in advance. Drugs for mental health and many other things have a similar problem. The medical technology needed to target pills to specific patients simply does not exist yet in most cases.

Thus, private investors and the government, invested in a "moonshot" - the human genome project.

HGS's mission was to map human DNA so that someday, a doctor might be able to analyse my genes and prescribe the right allergy (or other) medicine based on that. However, almost 10 years after the biotech stock bubble, HGS is still an investment in potential and hope, although there is significant progress. According to the company website, "HGS has a well balanced and deep portfolio of novel drugs directed toward diseases that represent significant unmet medical need. Three of these products are in late-stage development." In other words, after more than a decade and billions of dollars of research, all of their products are still in development.

In Obama's news conference last night, he said "If there's a blue pill and a red pill, and the blue pill is half the price of the red pill and works just as well, why not pay half price for the thing that's going to make you well?" First, HMOs already try to do this, but the same pill might not be effective for all people, and the government cannot regulate this problem away. Second, very often we don't know which pill will work, contrary to Obama's rhetoric. This is one of many assumptions the President is asking us to make in order to restructure the health care system - that we have already achieved all of the goals of the human genome project. That medical science is more advanced than it really is. However, the truth is that Apollo is still on the launch pad.

Someday, we hope genetic researchers will be able to develop more reliable medicines. HGS stock tripled on Monday due to a successful trial of a potential lupus treatment, but it wasn't even noticable on the long-term stock chart. Investors, many burned when the last bubble burst, still generally see success as being far in the future. In contrast, Obama is asking us to commit billions of taxpayer money by the end of this year while the necessary medical technology could be decades away (I hope it's not, but it probably is).

Just as stock investors rushed into HGS years ago on the hope of medical miracles, Obama wants taxpayers to rush into medical "reform" on the hope of an unlikely combination of the same medical miracles, plus a slew of regulatory ones. Taxpayers should wait.

Who's running the health care show?

A CNN article says "some congressional Democrats are 'baffled,' and another senior Democratic source told CNN that those members are frustrated that that they're not getting more specific direction from him on health care."

Haven't they read Obama's extensive health care plan?

Oh wait - this isn't the Obama plan - he's letting Congress write it, just like the pork-laden stimulus package. The New York Times pointed out that there currently is no "Obama plan" on the table since he has not endorsed any of the plans being discussed in Congress. (The NYT later removed the remark from the story).

Isn't it odd that Obama got so much credit for all the detailed "plans" he displayed on his campaign website while running for President, but now is deferring to Congress so much that his own party is confused and frustrated with him?

Perhaps Obama intended to have Daschle quarterback this process, but Daschle is not around anymore.

Let's see what Obama says tonight in his prime-time speech...

A 0% Tax Rate?

An interesting opinion piece in the Wall Street Journal last week made the case that the U.S. tax code has become so screwed up, that a 0% tax rate for the bottom 60% of income earners would be better.

"The federal income tax code is now so mangled that we can probably increase federal revenues with a 0% income tax rate for a majority of Americans.

Long before President Barack Obama took office, the bottom 40% of income earners paid no federal income taxes. Because of refundable income tax credits like the Earned Income Tax Credit (EITC), in 2006 these bottom 40% as a group actually received net payments equal to 3.6% of total income tax revenues, according to the latest Congressional Budget Office data. The actual middle class, the middle 20% of income earners, pay only 4.4% of total federal income tax revenues. That means the bottom 60% together pay less than 1% of income tax revenues."

Obama criticizes checks and balances

In an AP Story today , "President Barack Obama is defending his relentless campaign for a health care bill before Congress' August recess, saying 'the default in Washington is inaction and inertia.'"

Yes, Mr President, our government was set up intentionally with checks and balances to keep overzealous governments from doing stupid things. If you don't like it, maybe you should try a dictatorship...You know that was a joke, right?

Did Goldman make too much money?

Goldman Sachs posted a huge profit last week, in the wake of unprecedented problems in the financial sector. An interesting article in the Washington Post today, "Resist the Urge to Punish Success", says:

"Conventional wisdom says that Goldman's profit must be the result of a formula that involves excessive risk. Former labor secretary Robert Reich points to Goldman's "value at risk" calculations to conclude that the government should limit Goldman's risk-taking.

How quickly we forget that just a few months ago, nearly all the formulas that were intended to explain the behavior of the bond markets and provide banks with the tools to manage their risk turned out to be useless -- or worse. A regulatory regime whose goal is to limit profit, in the hope of thereby limiting risk, is one that merely codifies the same bogus and incompetent thinking about risk that held sway in the financial industry during the mortgage bubble."

What risk systems will our government come up with, when the previous regulators and most of Wall Street failed? What White Swans will they monitor in their attempt to uncover and prevent the next Black Swan? And, what doors will the new system open to enable the next crisis?

How much money has the government made on their investments during this crisis? My guess is that Goldman has a better handle on risk than the regulators.

Whenever I see these articles about a company being "too profitable", it reminds me of this story from the Wall Street Journal in August 2008: "What is a 'windfall' profit?" It explains how difficult it is to identify one, and that "what constitutes an abnormal profit is entirely arbitrary. It is in the eye of the political beholder, who is usually looking to soak some unpopular business. In other words, a windfall is nothing more than a profit earned by a business that some politician dislikes. And a tax on that profit is merely a form of politically motivated expropriation. It's what politicians do in Venezuela, not in a free country."

Do some people make too much money? Sure. Is it possible to "correct" that without creating bigger problems? Probably not. I'd rather have the companies that make profits be in the U.S., hiring Americans, than moving to other countries if the U.S. becomes a horrible place to do business because too much success has become a crime.

Politics and Investments don't mix

Politics is often about getting votes. Politicians campaign for the next election as soon as the last is over. Long-term objectives are not their strength.

Investing well is about thinking long-term and not chasing short-term results. Investment cycles are generally longer than election cycles.

One area where these short-term and long-term goals conflict most obviously is in the management of large university endowments. The goal of the investment manager at an endowment is to contribute some percentage of its assets (usually about 4.5 to 5%) to the university's operating budget. They also need to earn a little extra to keep up with inflation (about 3% more). So, their target is about 8%, and they need to be as consistent as possible to keep the school's budget from jumping up and down.

At the end of 2007, the S&P 500 Index had increased by 12.8%, on average, for 5 years. This return was above normal, and some universities earned more than this. Some politicians started calling for endowments of large universities to expand scholarship programs to more people who can't afford college (and who were constituents of said politicians). However, many investment managers realized it was too good to last, the markets would eventually fall, and were resisting paying out more. The politicians, in turn, made it a point in a public letter to tell their constituents how greedy these folks were. How could they possibly deny opportunities to bright young students when the markets had provided such surpluses?

In 2008, the S&P 500 dropped -38.5% in the midst of a recession that started in late 2007 and a credit crisis fueled by irresponsible behaviour by many parties, including politicians (I'll need several other posts to talk about that!).

So, the chatter about expanding scholarship programs subsided, and the blame game continued, but with different rules. How could these investment managers so foolishly lose all of this money? Even more, some of them are getting bonuses? Those criminals!!!

Well, the reason some investment managers were due to get bonuses is that they are paid for performance relative to an index, and usually over a multi-year period. For example, if the S&P is down -38%, and they were down "only" 35%, they saved their employer a lot of money. Bonuses were set up this way to encourage long-term thinking and discourage excessive risk-taking in up markets. After all, investment manager can't control which way the wind blows, only how they set their sails.

Now, the politicians are pounding their chests about taking these bonuses away (sometimes by voiding contracts). Why should anyone get a bonus for losing money? Don't they realize people are losing their jobs? Never mind that these bonuses would likely be paid out of the money saved by managing the money well. Also never mind that there are good reasons the bonuses were set up this way. Also never mind that large endowments are increasingly competing for talent with investment firms that pay much, much more.

In response to political pressure, some bonus arrangements are being re-written so that no bonus is paid in negative years, and higher bonuses paid in positive years.

So, the next time there is a tech bubble or housing bubble, or any short-term mania in the market, the government will be responsible for setting up a system that strongly encourages investment managers to take as much risk as possible in order to get the biggest bonus they can before the bubble inevitably bursts! Which means their employers are likely to lose even more money on the way down, and be in even bigger trouble.

Of course many investment managers will be responsible custodians of the money they manage, in spite of short-sighted incentive systems. But, there are also many who will do what they are paid to do. People respond to the incentives put before them, particularly if they report to a board that might fire them for trailing their peers in a bull market, or if honoring bonus contracts leads to public shaming with the press at full attention.

Also, there are politicians who understand investing and the need to think beyond the next election. But, whether investment performance is good or bad, there will be politicians who need to show their constituents how much they care about them and that they need their vote. They will focus on the short-term problem, and how to get credit for attempting to "fix" it. And then there are constituents who don't mind letting politicians have it both ways.

Economists: Left vs Right

Economics (the "dismal science") tries to model human behavior, but naturally has to make a lot of assumptions. Greg Mankiw, who was chairman of President Bush's Council of Economic Advisors from 2003 to 2005 and now teaches at Harvard, posted his thoughts on how economists on the right and left differ in their worldview and how they interpret the "facts".

For example:
"The right sees people as largely rational, doing the best the can given the constraints they face. The left sees people making systematic errors and believe that it is the government role’s to protect people from their own mistakes."

Link to Greg Mankiw's post

Happy reading!

One way state-run health care could widen the rich/poor divide

In Britain, National Institute for Health and Clinical Excellence (NICE) (sometimes derided in the US as the "National Institute for Compulsory Euthanasia") decides what medical treatments will be reimbursed according to the cost of a "quality-adjusted life-year" (QALY). If the cost of the treatment, per year that it extends life, is higher than the QALY, the government won't back the treatment. The limit is £30,000, according to a 2008 Economist article. Not an awful lot of money. The purpose is to control health care costs.

A similar policy in the US would indirectly discriminate against the poor because those with the means will just pay for the treatments out-of-pocket, since they can afford it. Those without the means will be without.

Of course, this applies only to already available treatments. If the government decides some treatments are too expensive, biotech and drug companies will be less likely to develop drugs that cost more than the reimbursement rate, since the market for those drugs will shrink dramatically. Who knows what medical advances would be prevented by government rationing?

Do we really need the government to put a dollar value on how much "life, liberty and the pursuit of happiness" each of us has a right to? Particularly when some lives are worth more than others, by official government policy?

References:
Wikipedia page on QALY
Economist article: "NICE turns Nasty"

So what's this all about?

OK - so I have a blog now. Now I can keep facebook relatively clean of "serious stuff", and put it all here! But, once I decided I needed a blog, I didn't know what to call it.

Some of you may know the book "The Black Swan" by Nassim Nicholas Taleb. The title is a reference to the idea that, years ago, Europeans thought all swans were white, because that was all they saw. But, they eventually found black ones in Australia, proving them wrong. Because Taleb luckily published the book right before the current financial crisis, he has become something of a celebrity philosopher. The term "Black Swan" comes up all the time in financial writing whenever something seems like an unlikely, extreme event that contradicts prior experience. Then, the idea started spreading outside finance and now everyone is looking for Black Swans. Politicians are making the "causes" of the Black Swans into scapegoats, Black Swans make great stories for journalists trying to win Pulitzers; economists want to win Nobel Prizes by finding the next Black Swan etc, etc.

So, I thought something about White Swans would be unorthodox and sarcastic enough for my blog. Besides, many extreme Black Swan stories (i.e. the credit crisis) are really the result of many ordinary choices that accumulate (i.e. the millions of decisions that added up to the crisis, but more on that in a later post). The White Swan must feel left out.

I hope I can post and/or write some interesting and informative stuff here, and maybe entertaining too. I hope you'll read and comment whether you agree or not. If you disagree, perhaps you can point out some Black Swans I haven't thought of.