• Recommendations for Further Reading
  • February 21, 2020

Opioids, improving teaching, and waste in health care

Prescription opioids are part of a larger epidemic that includes heroin and synthetic drug abuse.

Iryna Imago

Smorgasbord

Bryce Pardo, Jirka Taylor, Jonathan P. Caulkins, Beau Kilmer, Peter Reuter, and Bradley D. Stein have ­co-authored an ­e-book on The Future of Fentanyl and Other Synthetic Opioids.

Although the media and the public describe an opioid epidemic, it is more accurate to think of it as a series of overlapping and interrelated epidemics of pharmacologically similar substances—the opioid class of drugs. . . . The first wave was prescription opioids, the second wave was heroin, and the third—and ongoing—wave is synthetic opioids, such as fentanyl. . . . Most of the fentanyl and novel synthetic opioids in U.S. street markets—as well as their precursor chemicals—originate in China, where the regulatory system does not effectively police the country’s expansive pharmaceutical and chemical industries. According to federal law enforcement, synthetic opioids arrive in U.S. markets directly from Chinese manufacturers via the post, private couriers (e.g., UPS, FedEx), cargo, by smugglers from Mexico, or by smugglers from Canada after being pressed into counterfeit prescription pills.

Recent RAND Corporation research identified multiple Chinese firms that are willing to ship 1 kg of nearly pure fentanyl to the United States for $2,000 to $5,000. In terms of the ­morphine-equivalent dose (MED; a common method of comparing the strength of different opioids), a ­95-percent pure kg of fentanyl at $5,000 would generally equate to less than $100 per MED kg. For comparison, a ­50-percent pure kg of Mexican heroin that costs $25,000 when exported to the United States would equate to at least $10,000 per MED kg. Thus, heroin appears to be at least 100 times more expensive than fentanyl in terms of MED at the import level. . . . For reference, if the total U.S. heroin market was on the order of 45 pure metric tons. . . . before fentanyl and if fentanyl is 25 times more potent than heroin, then it would only take 1,800 ­1-kg parcels to supply the same amount of MEDs to meet the demand for the entire U.S. heroin market.

Pardo, et. al (2019)

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The World Development Report 2020 is subtitled “Trading for Development in the Age of Global Value Chains”.

International trade expanded rapidly after 1990, powered by the rise of global value chains (GVCs). This expansion enabled an unprecedented convergence: poor countries grew faster and began to catch up with richer countries. Poverty fell sharply. These gains were driven by the fragmentation of production across countries and the growth of connections between firms. Parts and components began crisscrossing the globe as firms looked for efficiencies wherever they could find them. Productivity and incomes rose in countries that became integral to GVCs—Bangladesh, China, and Vietnam, among others. The steepest declines in poverty occurred in precisely those countries. Today, however, it can no longer be taken for granted that trade will remain a force for prosperity. Since the global financial crisis of 2008, the growth of trade has been sluggish, and the expansion of GVCs has slowed. . . . At the same time, two potentially serious threats have emerged to the successful model of ­labor-intensive, ­trade-led growth. First, the arrival of ­labor-saving technologies such as automation and 3D printing could draw production closer to the consumer and reduce the demand for labor at home and abroad. Second, trade conflict among large countries could lead to a retrenchment or a segmentation of GVCs.

World Bank (2019)

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The World Trade Report focuses on “the future of services trade”.

While the value of goods exports has increased at a modest 1 per cent annually since 2011, the value of commercial services exports has expanded at three times that rate, 3 per cent. The services share of world trade has grown from just 9 percent in 1970 to over 20 percent today—and this report forecasts that services could account for up to ­one-third of world trade by 2040. This would represent a 50 percent increase in the share of services in global trade in just two decades. There is a common perception that globalization is slowing down. But if the growing wave of services trade is factored in—and not just the modest increases in merchandise trade—then globalization may be poised to speed up again.

World Trade Organization (2019)

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Venkatraman Anantha Nageswaran and Gulzar Natarajan explore “India’s Quest for Jobs: A Policy Agenda”.

By 2020, India is expected to be the youngest country in the world, with a median age of ­twenty-nine, compared to ­thirty-seven for the most populous country, China. . . . The burgeoning youth population has led to an estimated 10–12 million people entering the workforce each year. In addition, the rapidly growing economy is transitioning away from the agricultural sector, with many workers moving into secondary and tertiary sectors. Employing this massive supply of labor is, perhaps, the biggest challenge facing India. . . . India is often considered one of the most difficult places to start and run a business. . . . One of the biggest hurdles that potential enterprises in India face is the complexity of the registration system—all enterprises must register separately with multiple entities of the state and central governments.

Further, there are registrations specific to sector or occupational categories—for example, manufacturing enterprises with more than ten employees must register with the labor department under the Factories Act. . . . According to current labor laws, service enterprises and factories must maintain ­twenty-five and ­forty-five registers, respectively, and file ­semi-annual and annual returns in duplicate and in hard copy. Furthermore, regular paperwork tends to be convoluted; salary and attendance documents should be simple but instead require tens of entries. . . . All these requirements add up to impose prohibitive costs that reduce the success of these businesses.

Nageswaran and Natarajan (2019)

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Adel Abdellatif, Paola Pagliani, and Ellen Hsu discuss “Leaving No One Behind: Towards Inclusive Citizenship in Arab Countries” .

Unaccountable and unresponsive public institutions as well as perceived widespread corruption often drive exclusion and disenfranchisement for large segments of the population. . . . Trust in elected bodies, those that should be in charge of redesigning the social contract, is particularly low. Lack of trust is also reflected in low electoral turnouts—below 50 percent in most countries. . . . Perceptions of ineffective institutions seem confirmed by stagnating or narrowly based economic structures, high unemployment, young people facing difficult prospects to secure their future and uneven provision of social services and social protection nets. Unemployment, averaging 10 percent, almost double the world average, disproportionately affects young people, at 25 percent. . . . 84% of the population is affected by or at risk of water scarcity. The decline of arable land and the dependency on food imports expose the population to risks of food insecurity.

Abdellatif, Pagliani, and Hsu (2019)

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The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2019 was awarded to Abhijit Banerjee, Esther Duflo, and Michael Kremer “for their experimental approach to alleviating global poverty.” As background, the Nobel committee published “Scientific Background: Understanding Development and Poverty Alleviation”.

This year’s Prize in Economic Sciences rewards the experimental approach that has transformed development economics. . . . First, in the ­mid-1990s, Kremer and his ­co-authors launched a set of randomized controlled trials on schooling in Kenya. In effect, their approach amounted to splitting up the question of how to boost human capital in ­low-income countries into smaller and more manageable specific topics, each of which could be rigorously studied via a carefully designed field experiment. Soon thereafter, Banerjee and Duflo, often together with Kremer or others, broadened the set of educational topics and expanded the scope of the research to other areas, including health, credit and agriculture. Second, in a series of contributions, Banerjee and Duflo articulated how pieces from such microeconomic studies can help us get closer to solving the broad development puzzle: what explains the enormous difference in ­per-capita income across countries?…A deeper understanding of the development problem thus requires an explanation of why some firms and individuals do not take advantage of the best available opportunities and technologies. Banerjee and Duflo further argued that these misallocations can be traced back to various market imperfections and government failures. …Finally, by designing new experimental research methods and by addressing the key challenge of generalizing results from a specific experiment—i.e., the issue of external validity—the Laureates firmly established this transformed approach to development economics.

Nobel committee (2019)

Universal Basic Income

Melissa S. Kearney and Magne Mogstad have written “Universal Basic Income (UBI) as a Policy Response to Current Challenges”.

First, some view a UBI [universal basic income] as a reasonable response to growing inequality, to stem both economic and political unease. . . . Second, some worry about the widespread elimination of ­well-paying jobs for many workers in the U.S. due to robots and other technological advancements. For this reason, the idea seems to have caught on among a number of tech futurist personalities. . . . A third, very distinct motivation for a UBI scheme is to streamline the current complicated and sometimes counterproductive system of U.S. transfer programs. . . . We view a UBI to be a ­sub-optimal, and possibly harmful, policy response to all three of these challenges. A UBI in its most basic form would be massively expensive yet do little to reduce inequality or advance opportunity. Devoting that level of spending to targeted benefits, focusing on the poorest and those hardest hit by ongoing economic forces, and polices dedicated to human capital development instead of mere redistribution would produce a much greater social return than a UBI.

Kearney and Mogstad (2019)

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The Annual Review of Economics includes a ­three-paper “Symposium: Universal Basic Income”. In “Universal Basic Income in the Developing World,” by Abhijit Banerjee, Paul Niehaus, and Tavneet Suri, the authors write:

A central question about UBI is whether universality is in fact efficient. For any given budget, is it better to spread those resources evenly or to give larger amounts to the poorest? . . . We suspect that universality has several ­under-appreciated benefits, and targeting several underappreciated limitations. . . . Government capacity to implement nuanced targeting schemes is often limited, particularly so in the poorest areas where it is most important to get it right. In cases like these, making eligibility universal may have a modest effect on the realized incidence of benefits while at the same time substantially reducing the scope for corruption and other abuses of power.

Niehaus, et al. (2019)

Symposia

 

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Dædalus has published a ­12-paper symposium (plus an introduction) about “Improving Teaching: Strengthening the College Learning Experience,” edited by Sandy Baum and Michael McPhersson. They write in their introductory essay:

An odd feature of the public policy discussion of higher education is the near absence of attention to the quality of teaching. . . . Instead, questions about college admissions, pricing and cost, debt, and financial returns dominate the news and policy discussion. These are worthy topics of study, but they sidestep examination of what goes on inside the "black box" of teaching and learning that college students actually experience. . . . An observer from another planet visiting American Ph.D. programs might well conclude that the graduate students there are being prepared for full-time careers in academic research. . . . Yet after graduating, typical faculty members in the United States actually spend the majority of their professional time on undergraduate teaching and related activities, spending less than one-quarter of their time on graduate instruction and research combined. The "theory" that would justify this mismatch between what faculty are prepared for and what they actually do is that the hard part of being a good teacher is knowing the subject matter, and the rest can be picked up on the job. This is not an assumption we would readily accept in other professions like aviation or surgery.

Baum and McPherson (2019)

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The Russell Sage Foundation Journal of the Social Sciences has published a ­10-paper symposium, edited by Erica L. Groshen and Harry J. Holzer, on the general theme of “Improving Employment and Earnings in ­Twenty-First Century Labor Markets” . For a sense of the contents, here are titles and authors for the first five papers:

  • “From Immigrants to Robots: The Changing Locus of Substitutes for Workers,” by George J. Borjas and Richard B. Freeman
  • “Public Universities: The Supply Side of Building a Skilled Workforce,” by John Bound, Breno Braga, Gaurav Khanna, and Sarah Turner
  • “Wages and Hours Laws: What Do We Know? What Can Be Done?” by Charles C. Brown and Daniel S. Hamermesh
  • “Unions, Worker Voice, and Management Practices: Implications for a ­High-Productivity, ­High-Wage Economy,” by Thomas A. Kochan and William T. Kimball
  • “Making Ends Meet: The Role of Informal Work in Supplementing Americans’ Income,” by Katharine G. Abraham and Susan N. Houseman.

Conversations with Economists

Tyler Cowen conducts one of his “Conversations with Tyler” with Hal Varian in “Hal Varian on Taking the Academic Approach to Business”.

TC: How will 5G change my world?

HV: Basically, you should think of 5G as ­Wi-Fi everywhere so that you’ve got a ­high-speed communication without having to go through any sort of special operations. . . . When you look at technologies like autonomous vehicles and things like that, they’re dealing with vast amounts of information. It’s often stored and manipulated locally, but sometimes it needs to be shared. Doing that kind of sharing will be easier if you have ­high-bandwidth 5G technology. But realistically speaking, for most of what you’re going to be doing, it will just save you a small amount of time.

TC: Why are textbooks still priced so high?

HV: They are priced remarkably high, and it’s a situation where I really would like to see lower prices because, obviously, there’s a durable goods monopoly problem there. As you have more and more competition from previous editions, each of the new editions has to differ markedly from the old edition to support the pricing model. But that’s getting harder and harder to do. In fact, a friend of mine once told me, "Having a successful textbook is like being married to a very wealthy person you don’t like much anymore."

Cowen (2019)

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Catherine L. Kling and Fran Sussman share “A Conversation with Maureen Cropper” in the Annual Review of Resource Economics. For example, I had not known that Cropper started as a monetary economist. She says: 

Frankly, my interests at the time were really in monetary economics, so I took several courses at the Cornell Business School, including courses in portfolio theory. My dissertation was on bank portfolio selection with stochastic deposit flows. . . . At this time, I was not doing anything in environmental economics. In fact, my first job offer was from the NYU Business School. The reason I went into environmental economics is that I met Russ Porter in graduate school. . . . We decided that we would go on the job market together and looked for a place that would hire two economists. We wound up at the University of California, Riverside, which at the time was the birthplace of the Journal of Environmental Economics and Management (JEEM). . . . It was going to UC Riverside that really caused me to switch fields and go into environmental economics. . . . There are moments when I wonder what would’ve happened if I had gone to the NYU Business School instead of UC Riverside. There are many situations when it is, to some extent, a matter of chance how things will unfold. Would I do anything differently? No, I don’t think so, not really.

Kling and Sussman (2019)

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David A. Price interviews Emmanuel Farhi.

If you look at the world today, it’s very much still ­dollar-centric. . . . The U.S. is really sort of the world banker. As such, it enjoys an exorbitant privilege and it also bears exorbitant duties. Directly or indirectly, it’s the ­pre-eminent supplier of safe and liquid assets to the rest of the world. It’s the issuer of the dominant currency of trade invoicing. And it’s also the strongest force in global monetary policy as well as the main lender of last resort. If you think about it, these attributes reinforce each other. The dollar’s dominance in trade invoicing makes it more attractive to borrow in dollars, which in turn makes it more desirable to price in dollars. And the U.S. role as a lender of last resort makes it safer to borrow in dollars. That, in turn, increases the responsibility of the U.S. in times of crisis. All these factors consolidate the special position of the U.S. But I don’t think that it’s a very sustainable situation. More and more, this hegemonic or central position is becoming too much for the U.S. to bear. 

In my view, there’s a growing and seemingly insatiable global demand for safe assets. And there is a limited ability to supply them. In fact, the U.S. is the main supplier of safe assets to the rest of the world. As the size of the U.S. economy keeps shrinking as a share of the world economy, so does its ability to keep up with the growing global demand for safe assets. The result is a growing global safe asset shortage. It is responsible for the very low levels of interest rates that we see throughout the globe. And it is a structural destabilizing force for the world economy. . . . Basically, I think that the role of the hegemon is becoming too heavy for the U.S. to bear. And it’s only a matter of time before powers like China and the eurozone start challenging the global status of the dollar as the world’s ­pre-eminent reserve and invoicing currency. It hasn’t happened yet. But you have to take the long view here and think about the next decades, not the next five years. I think that it will happen.

Federal Reserve Bank of Richmond (2019)

Discussion Starters

William H. Shrank, Teresa L. Rogstad, and Natasha Parekh discuss “Waste in the US Health Care System: Estimated Costs and Potential for Savings”.

In this review based on 6 previously identified domains of health care waste, the estimated cost of waste in the US health care system ranged from $760 billion to $935 billion, accounting for approximately 25% of total health care spending. . . . Computations yielded the following estimated ranges of total annual cost of waste: failure of care delivery, $102.4 billion to $165.7 billion; failure of care coordination, $27.2 billion to $78.2 billion; overtreatment or ­low-value care, $75.7 billion to $101.2 billion; pricing failure, $230.7 billion to $240.5 billion; fraud and abuse, $58.5 billion to $83.9 billion; and administrative complexity, $265.6 billion.

Shrank, Rogstad, and Parekh (2019)

 

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The Health Effects Institute has authored the State of Global Air 2019:

Air pollution (ambient PM2.5, household, and ozone) is estimated to have contributed to about 4.9 million deaths (8.7% of all deaths globally) and 147 million years of healthy life lost (5.9% of all DALYs [­disability-adjusted life years] globally) in 2017. The 10 countries with the highest mortality burden attributable to air pollution in 2017 were China (1.2 million), India (1.2 million), Pakistan (128,000), Indonesia (124,000), Bangladesh (123,000), Nigeria (114,000), the United States (108,000), Russia (99,000), Brazil (66,000), and the Philippines (64,000). . . . Air pollution collectively reduced life expectancy by 1 year and 8 months on average worldwide, a global impact rivaling that of smoking. This means a child born today will die 20 months sooner, on average, than would be expected in the absence of air pollution.

Health Effects Institute (2019)

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Jason D. Delisle and Preston Cooper offer a short essay on “International Higher Education Rankings: Why No Country’s Higher Education System Can Be the Best”:

In England, where the vast majority of the country's population is concentrated, universities charge undergraduate students tuition of up to $11,856, making English universities some of the most expensive in the world. That is why the United Kingdom ranks last on subsidies in our analysis, with just 26 percent of higher education funding derived from public sources. However, Britain's student loan program complicates this high-tuition, low-subsidy story. To enable students to afford these high fees, the government offers student loans that fully cover tuition. Ninety-five percent of eligible students borrow. Repayment is income contingent; new students pay back 9 percent of their income above a threshold for up to 30 years, after which remaining balances are forgiven. Despite the lengthy term, the program is heavily subsidized: The government estimates that just 45 percent of borrowers who take out loans after 2016 will repay them in full.

England's high-resource, high-tuition model is relatively new. Until 1998, English universities were tuition-free, with the government directly appropriating the vast majority of higher education funding. . . . In 1998, the center-left government of Tony Blair began allowing institutions to charge tuition to supplement their direct government funding. At the same time, the government expanded its student loan program and introduced income-contingent repayment. Over the next two decades, university enrollments and funding both surged, and today the United Kingdom ranks among the top nations for both resources and attainment.

Delisle and Cooper (2019)