Different River

”You can never step in the same river twice.” –Heraclitus

March 2, 2005

Expected Value

Filed under: — Different River @ 10:00 pm

Some fellow put up a padded manila envelope with undisclosed contents on eBay. No comment was made about the what was in the envelope except that it was not disgusting or illegal, and was “valuable” (but the value was unspecified).

The “mystery envelope” sold for $7600.

To — in a reversal of roles — an internet casino, which is bragging that it bought the thing, but saying “only time will tell” if they will reveal what’s inside. (That, and whether or not is makes them look foolish.)

Talk about beating somebody at their own game!

I guess they think they’ll get publicity worth $7600 for this. They’ve got the publicity, but I have no idea what it’s worth.

Carnival of the Vanities #128

Filed under: — Different River @ 5:12 pm

… is up here.

Evangelical Atheism

Filed under: — Different River @ 4:36 pm

I don’t know what, if any, religious beliefs are held by Jane Galt, but she has an excellent post on what she terms “Evangelical Atheism,” and also on the connection between atheism and socialism.

If drugs were not outlawed…

Filed under: — Different River @ 3:40 pm

… would non-outlaws do drugs?

Russell Roberts at Cafe Hayek seems to think not:

This planet would be a better place if we allowed things that were immoral to be merely looked down on, rather than to be against the law. The war on drugs presumes that if drugs are legal, people will take more of them because somehow, making them legal sanctions them.

Now, I know Russell Roberts to be a competent economist — he’s a professor of economics at George Mason University and has a Ph.D. from the same place as I do.

So he must know that the notion that “if drugs are legal, people will take more of them” is more than just a “presumption” but an inevitable conclusion of the accepted economic theory — and it has nothing to do with whether “making them legal sanctions them”, but with the principle of utility maximization. In other words, a consumer of anything, legal or not, optimizes consumption of each good (or service or activity) based on how much benefit (“utility”) that good provides, offset by how much the good costs to obtain, and subject to total resource contsraints (mainly time and income). If the benefit of a particular good remains the same, but the cost goes down, people will consume more of that good. Maybe not every individual consumer, but consumers as a whole. Making drugs illegal increases their cost, if for no other reason than there is a greater-than-zero probability of getting caught and punished for using them. Making drugs legal removes this portion of the cost, and reducing the cost increases the optimal level of consumption (from the standpoint of the drug consumer). In addition, to compensate the seller for the probability that he is caught and punished, the price paid is higher when drugs are illegal. If drugs were made legal, sellers would be willing to sell them at a lower price, since they would not have to bear these costs. (Of course they’d be happier keeping the price high, but competition would force them to lower it to reflect lower costs.) Furthermore, the illegality of drugs requires them to be produced in secrecy, meaning they are probably not produced at the optimal scale. If drugs were legalized, they would probably be mass-produced (and maybe even sold at your local Safeway), which would further lower the cost.

In short, removing the legal prohibitions against drugs removes the possibility of being punished for using or selling them, and these will both reduce the costs, and therefore increase the consumption of drugs. This could occur either by increasing the quantity of drugs consumed by people who consume them even when they’re illegal, or increasing the number of people who consume drugs, or both.

The only possible objection to this argument is the notion that people use drugs because they’re illegal. I’ve heard this argument, but I don’t find it plausible. Sure, there’s a “rebellion” element to drug use, but if drug use is socially stigmatized (“looked down on” as Prof. Roberts says), that rebellion element will still be there. And, is there any evidence that consumption of alcohol decreased after prohibition was repealed? Given that it seems more than 80% of the people I know drink alcohol at least occasionally, I find that hard to believe.

Note acknowledging all this does not require Prof. Roberts to change his position in favor of legalizing drugs and keeping them “looked down on.” He could simply say that in his view, the social costs of keeping drug use illegal exceeds the social costs of the increased drug use that would result from making them legal. That’s partly an empirical question, but partly a judgement call based on the values one attaches to the non-monetary consequences of drug enforcement and drug use.

Tax the Lawyers?

New Jersey has imposed a $75 annual tax (for the next three years only) on lawyers, doctors, dentists, chiropractors and professionals to fund medical malpractice insurance relief. The are also taxing all employers in the state $3 per employee. (I guess this is part of their “send jobs to other states” plan.)

True the form, the lawyers sued. Specifically, the New Jersey State Bar Association sued, claiming that applying this tax to lawyers violated their 14th Amendment right to equal protection. Last week, they were denied a temporary injunction against collecting the tax. (If they win, they can get their $75-$225 refunded.)

Now, my personal opinion is that this tax is silly. It’s not a coherent attempt to solve any real problem, because it will not affect anyone’s behavior with regard to malpractice. For example, every lawyer licensed in New Jersey has to pay, whether they are filing malpractice claims, defending doctors against them, writing wills, closing real estate transactions, fighting speeding tickets, prosecuting criminals, or keeping their license current while staying home with the kids.

Still, there is something poetic about seeing lawyers sue to get out of the $75 tax lots of other people have to pay, on the grounds that for lawyers to pay is “unequal.” ;-)

Better yet, RiskProf asks, “if the litigant does succeed would the winning lawyers get big legal fees and some coupons for the members of the bar?” ;-)

Malpractice Abuse Limits Access to Care

Filed under: — Different River @ 2:23 am

If you don’t believe that the current medical malpractice situation adversely affects patients, see this story about a region of southern Illinois that spent an entire year trying to find a neurosurgeon to replace the last two, who left due to a “hostile medical malpractice climate.”

Telling quote from the hospital administrator: “I didn’t think we’d be able to do it this rapidly.”

(Hat tip: Kevin, M.D.)

While trying to preserve the right to sue, and suing for as much money as possible, people forget that you can’t actually force doctors to practice any particular medicine in any particular state — or even to practice medicine at all, for that matter. If you make the malpractice situation bad enough, doctors will leave.

(This is not the first instance I’ve seen of this — just the first since I started this blog not too long ago. It happens all the time.)

Lest you think that malpractice claims are the result of incompetent or negligent practice of medicine (“bad doctors”), keep in mind that bad doctors have, on average, no more claims against them than anybody else. Look at it this way: if malpractice claims were the result of bad doctoring, then bad doctors would have higher claims (on average) than good doctors, and therefore would pay higher rates for their malpractice insurance — just as “bad drivers” (those with lots of accidents) pay more for auto insurance. This is called “experience rating” — your claims experience affects the rate you pay. But medical malpractice insurance is not generally experience-rated — a given doctor’s premium depends only on his/her specialty and ZIP code.

There is no law or regulation that prohibits experience-rating in medical malpractice insurance. The lack of experience rating is an outcome of a market process. Surely, if past malpractice claims were a good statistical predictor of future claims, insurance companies could increase their profits by offering discounts to doctors with fewer claims, thus attracting more “good risks” into their pool (that is, more customers from whom they’d collect premiums but for whom they’d not have to pay claims). This would, in turn, force premiums up for “bad doctors” and encourage doctors to practice better medicine to avoid insurance rate increases.

However, this doesn’t happen — insurance companies have not found it profitable to take case histories (as they do for drivers) to determine which doctors are likely to be sued. This means that, essentially, malpractice claims are a random event, statistically unrelated to bad medical care. Sure, some claims are due to incompetent or negligent doctors or hospitals — but not enough, percentage-wise, to make it possible to identify bad doctors or hospitals through their malpractice claims, or to use that information to set insurance rates. This shows that the malpractice problem is systemic, and is the due to a faultly legal system rather than bad doctors.

Britain Canceling Surgeries

Filed under: — Different River @ 2:00 am

I was going to title this “Great Moments in Socialized Medicine (2)” but decided to be more descriptive.

Health-care reformers in the United States often cite the British National Health Service (NHS) as an example of the sort of “single-payer” health care they would like to use as a model for the U.S. It will cut costs, they claim. Here’s one way nationalized health care cuts costs, as reported by the BBC.

More ops cancelled at last minute

The number of NHS operations cancelled at the last minute in English hospitals increased by almost 2,500 at the end of last year, official figures show.

Between October to December 17,402 operations were cancelled at short notice for non-clinical reasons.

This was an increase of 2,471 on the number cancelled in the three months between July and September 2004.

Why, you ask?

Operations may be cancelled at the last minute if a bed is no longer going to be available, or if staff are needed elsewhere.

In other words, they limit costs by limiting the number of beds and the number of staff (doctors, nurses, etc.). If they run out, they just cancel a bunch of surgeries. If this was your week, too bad. Oh, that colon cancer surgery you’ve been waiting a year and a half for? Cancelled, we ran out of beds this week. Back to the waiting list; when your name comes up again we’ll see if the cancer is still operable, and if so, we’ll reschedule. If not, sorry. Better luck in the next life.

The scary thing is, these figures are an improvement!

The Department of Health said the increase seen in October to December compared with the previous quarter was in line with seasonal trends.

The figure was a little lower than that for the same quarter in 2003, when there were 17,782 last-minute cancellations.

Great Moments in Gun Control

Filed under: — Different River @ 1:48 am

Advocates of gun control note this success: this guy didn’t have a gun, so everything must have turned out fine, right?

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