327 (25 July 2018)

Welcome to week 327!  The articles below caught my attention this week.  What are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  Article titles preceded by [SR] require a subscription to be read in their entirety, although complete articles might be found by an Internet title search.

Please let me know if you have questions or comments.

(13 July 2018): A Fear of Lawsuits Really Does Seem to Result in Extra Medical TestsThe New York Times

——–American doctors “often rail against the country’s medical malpractice system, which they say forces them to order unnecessary test and procedures to protect themselves if a patient sues them.”  Estimating the cost of such defensive medicine, though, has been difficult to do without a control group.  But researchers at Duke and MIT have found a group that has allowed them to do so by looking at “the health care system for active-duty members of the military.  Under longstanding law, such patients get access to a government health care system but are barred from suing government doctors and hospitals for malpractice.”  The study of researchers Jonathan Gruber (MIT) and Michael D. Frakes (Duke) “looked at what happened to the hospital care that military members received when a base closing forced them to use their benefits in civilian hospitals, where it is possible to sue.  Spending on their health care increased, particularly on extra diagnostic tests.”  The study indicated that “liability concerns cause treatment to rise by more than 5 percent for emergency room patients who go home the same day—or not at all in a typical office visit.”

********Gruber and Frakes used multiple measures to quantify quality of care.  It is not at all surprising that doctors would practice more defensive medicine when exposed to more exposure to litigation risk, but the relatively small size of the cost of that practice is.  The lesson from that seems to be that “Any law that limits the cases where patients can sue, or the amount of money they can collect, is likely to lower medical use in the hospital by less than the 5 percent they measured in their study.”  One must search elsewhere, it appears, to find the silver bullet that will bring health care costs under control.

(18 July 2018):Dying Alone in Japan: The Industry Devoted to What’s Left BehindBloomberg Businessweek

——Japan is aging.  “In 2017 there were 946,060 births and 1,340,433 deaths . . . marking a seventh consecutive year of population decline.”  Young people in Japan are putting off “marriage and children—or skip them altogether.  What’s left is one of the world’s oldest societies, millions of junk-filled homes, and a dearth of heirs.”  In this situation companies like the Tail Project have arisen.  Based near Tokyo, it “specializes in cleaning out and disposing of the property accumulated by the deceased, a service that [is] increasingly in demand.”  There is a professional group for people who clean out such homes.  The Association of Cleanout Professionals has 8,000 members, collectively bringing in “$4.5 billion a year.  Over the next 5 to 10 years, the group expects its membership will double.”

********The article provides a glimpse of what it is like to work in the competitive “clean out” industry, which is connected to Japan’s well-established secondhand industry.  Those who clean out the domiciles of Japanese who die alone have items that supply it regularly.  All this may seem rather sad, but the Japanese have a word for it: ‘Kodokushi’, which means “lonely death.”  Clearly this is a case where social and historical factors—the invisible handshake—are affecting the invisible hand.

********This is not a new story.  The phenomenon of lonely death was “first described in the 1980s” and it was reported on in 2015 by Al Jazeera in “The woman who cleans up after ‘lonely deaths’ in Japan.”  Furthermore, The New York Times had a lengthy story on the subject, but not the industry, in November 2017.  There was a nice follow up to the story, that indicates that it was a part of “The End” series.  Now that we know a bit about lonely death in Japan, what about its occurrence elsewhere, e.g., the United States?  I’ll be looking for that article.

(19 July 2018):60 Reasons Trump Worries About Pump PricesBloomberg.com

——–“It is 110 days to the midterms, and you will likely visit the gas station many times between now and then.  Hence there’s an all-hands effort to keep a lid on pump prices. . . . A close look at the most competitive House races shows why . . . Higher pump prices are especially panful if you drive more and earn less than average—which happens to be more common in red states.  ClearView Energy Partners LLC, a Washington-based research firm, produces regular analyses of how energy prices affect Americans.  It calculates the average red-state driver bought almost a fifth more gasoline than the average blue-state driver in 2017, paying for it out of disposable personal income that was 16 percent lower.”  It is notable, then, that there “are 60 House races currently defined as either leaning Republican or Democrat or a toss-up by the Cook Political Report, spread across 29 states.”

********To me the primary interest of the article is the possibility of making “deep dives” into the data to see what might affect the voting outcomes in the 2018 elections.  Does the president have sufficient control over policy “instruments” to affect the election and if so, does he have the inclination to use them?

********Regarding “deep dives” into the data, the article “Democrats Take a Data-Driven Approach to Win Rural America” presents one possible use.  Evidently “The lack of access to broadband and health care in less-populous areas of the U.S. are two of the issues that Democrats hope they can use to loosen the Republican grip on rural voters.”  The article immediately below connects nicely with this theme.

(19 July 2018): [SR]America’s Factory Towns, Once Solidly Blue, Are Now a GOP HavenThe Wall Street Journal

——–“The Republican Party has become the party of blue-collar America.  After the 1992 election, 15 of the 20 most manufacturing-intensive congressional districts in America were represented by Democrats.  Today, all 20 are held by Republicans.  The shift of manufacturing from a Democratic stronghold to a Republican one is a major force remaking the two parties.  It helps explain Donald Trump’s political success, the rise of Republican protectionism and the nation’s polarized politics.  It will help shape this year’s midterm elections.”

********This article is pretty detailed and defies easy summary by me.  The article notes, however, that “Many counties that leaned toward Democrats lost so many factory jobs during the last 25 years that they ceased being manufacturing centers.  As the U.S. factory workforce diminished in size—from 15.4% of the U.S. workforce in 1992 to 8.5% today—it moved out of big cities that were union strongholds and into blue-collar suburbs.”  As Stanford political scientist Jonathan Rodden notes, “Manufacturing moved to where the Republican Party has been building strength.”  As the article goes on to note, “The Republican Party didn’t have a grand strategy to capture manufacturing.  It happened over time as the economy and party changed.”  Rather, these changes seem to have been the logical consequences of sectoral changes in the United States resulting from the pursuit of freer international trade.

(20 July 2018):Fukushima’s Nuclear Imprint Is Found in California Wine (Drinkers, Don’t Panic)The New York Times

——–“Ever since a huge earthquake off the coast of Japan sent a tsunami crashing into a nuclear plant in Fukushima, setting off one of the world’s worst nuclear crises, scientists have been uncovering the radioactive legacy of the 2011 disaster. . . . Now a group of French nuclear physicists say they have stumbled on Fukushima’s signature in Northern California wine. . . . In a new study, the researchers report testing 18 bottles of California rosé and cabernet sauvignon from 2009 onward and finding increased levels of radioactive particles in the wine produced after the Fukushima disaster.  In the case of the cabernet, the levels of the radioactive materials doubled.”  The test used by the researchers derives from methods used to detect wine fraud, which is a “persistent and lucrative crime.”  The test is based upon the presence of cesium-137, which “cannot have existed before the mid-20th century”—certain nuclear events “would leave unique signatures on time and proximity to the grapes.”  Although ingesting cesium-137 can lead to an increased risk of cancer, the World Health Organization holds that the levels of radioactive material “from Fukushima in food and drink in countries outside Japan has been too low to result in a health hazard.”

********Interestingly, the cesium-137 test can be conducted on unopened wine bottles.  Evidently the idea for the test occurred to one of the researchers as he was shopping in a supermarket and found several bottles of Napa Valley cabernet sauvignon produced after Fukushima.  The Chernobyl disaster took place in April 1986—there is a new book out on it—so the methods used for Fukushima are no doubt applicable to European wines since then.  Then there is Three-Mile Island in 1979.  Do consumers put enough age on the wines of the northeastern U.S. to test them, too?  Obviously, there is a lot of wine that could (and should) be tested.  Even thought the NYT article provides reassuring words—don’t panic—it is easy to imagine that consumers don’t purchase wine with the expectation of ingesting cesium-137.  So, the Fukushima disaster should decrease the demand for the wines of Northern California, and presumably Oregon and Washington, ceteris paribus.

********While we are on the subject of wine, I thought the post “Lost in Translation?  Misunderstanding Old World and New World Wine” at The Wine Economist was noteworthy.  It touches upon a variety of subjects relating to how those in Europe and those in the United States think about (and regulate) wine.  In particular, a recent revision of wine classifications in France from four categories to three has French winemakers thinking a bit differently about specific segments of the wine market, especially in light of climate change: “Changing climate undermines the logic of winemaking rules established decades ago when growing conditions might have been much different.”

(25 July 2018):How About a Free Market for Wages?Bloomberg.com

********This opinion piece draws attention to the fact that the “U.S. economy is growing, but workers are seeing less and less of the benefits.  Since the Great Recession, real gross domestic product per capita has increased substantially, but real compensation per hour—which includes benefits like health care—hasn’t grown at all.”  A capitalism that works for only a “relatively small slice of society that owns large amounts of capital” is one that may well lead people to turn to other alternatives, “like the socialism now gaining popularity within the Democratic party and the younger generations.”  So, anyone who cares “about preserving “the free-market system should . . . be thinking very hard about how to raise wages.”  How might one do that?  At the federal level, “One idea is to change regulations and laws to make labor unions more powerful.  Another is to strengthen antitrust enforcement.  Such changes, to be sure, are unlikely in the current political context.  But the state level is a different matter.  At the state level, one can “ban noncompete agreements” that “bar employees from going to work for a company’s competitors.”  California has already done this.  A second possibility is “to vigorously police companies that try to collude to suppress wages.”  Although such the Sherman Antitrust Act generally holds such behavior to be illegal, antipoaching agreements might still be legal for franchise chains.  “Many franchises stipulate in their contracts that franchise owners aren’t allowed to hire each other’s workers.”  Clearly the current political context in North Carolina is unfavorable to the suggested state level changes to increase wages.

********Reading the opinion piece it is hard not to think of John Maynard Keynes and his General Theory of Employment, Interest, and Money (1936).  The book is widely regarded, at least by economists, as an attempt to save capitalism from itself by reforming—not replacing—capitalism.  In 1936 the problem to be solved was widespread unemployment and underproduction.  Today, it seems that the problem to be solved is large and growing inequality.  Will another Keynes come forth to reform capitalism?

May you have a good week!  Bruce ,

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