April 2008 – Page 3 – artdiamondblog.com

Non-Market Health Care Pricing Results in Health Care Shortages

(p. A22) When my Labrador retriever became acutely lame, we were able to locate a veterinary orthopedic expert in Atlanta within 48 hours who was able to repair a ruptured tendon within one week. But my prospects of identifying an endocrinologist who can care for my daughter’s diabetes when she turns 18 are much less promising.
The limited number of endocrine specialists is a not a consequence of limited demand — everyone is aware of the epidemic of diabetes we are facing. There are also shortages of generalists and other specialists, and the reason is the absence of market signals — i.e., market-based prices — for influencing the supply of physicians in various specialties.
The roots of this problem lay in the use of administrative pricing structures in medicine. The way prices are set in health care already distorts the appropriate allocation of efforts and resources in health care today. Unfortunately, many of the suggested reforms of our health care system — including the various plans for universal care, or universal insurance, or a single-payer system, that various policy makers and Democratic presidential candidates espouse — rest on the same unsound foundations, and will produce more of the same.
. . .
One important lesson of the 20th century is that, while markets are far from perfect, more choices are available when people are able to use free markets to interact with each other. Markets may not get the prices exactly correct all the time, but they are capable of self- correction, a capacity that has yet to be demonstrated by administrative pricing.
It tells you something when the supply of and demand for specialist veterinary care is so easily matched when the prices of these services are established on the market — while shortages and oversupplies are common for human medical care when the prices of these services are set by administrators in the public sector. Will health-care reformers — and American citizens — get the message?

For the full commentary, see:
Robert A. Swerlick. “Our Soviet Health System.” Wall Street Journal (Tues., Jun 5, 2007): A22.
(Note: ellipsis added.)

Entrepreneurial Medicine Hunter Seeks Cures in Ethnobotany

Source of photo: screen capture from slide show on online version of the NYT article quoted and cited below.

(p. C1) Part David Attenborough, part Indiana Jones, Mr. Kilham, an ethnobotanist from Massachusetts who calls himself the Medicine Hunter, has scoured remote jungles and highlands for three decades for plants, oils and extracts that can heal. He has eaten bees and scorpions in China, fired blow guns with Amazonian natives, and learned traditional war dances from Pacific Islanders.
But behind the colorful tales lies the prospect of money, lots of money — for Western pharmaceutical companies, impoverished indigenous tribes and Mr. Kilham.
. . .
(p. C5) In Peru, Mr. Kilham is betting on maca, a small root vegetable that grows here in the central highlands — “a turnip that packs a punch,” he says, adding “it imparts energy, sex drive and stamina like nothing else.”
That view is supported by studies carried out at the International Potato Center, a Lima-based research center that is internationally financed and staffed. Studies there show maca improves stamina, reduces the risk of prostate cancer and increases the motility, volume and quality of sperm.
Some peer reviewed studies published in the journal Reproductive Biology and Endocrinology backed up those findings.
. . .
One product, Maca Stimulant, is sold in Wal-Mart under Mr. Kilham’s Medicine Hunter brand. Mr. Kilham earns a retainer from both Naturex and Enzymatic Therapy, in addition to royalties from another Medicine Hunter-branded product at Wal-Mart.
Mr. Kilham says he earns around $200,000 each year in retainers, and sales are so buoyant he expects to make “in the mid-six figures” in royalties next year.
Mr. Kilham insists he is not in the business simply for financial gain. His motivation comes from promoting herbal medicines and helping traditional communities, he said.
“I have financial security and don’t need to make money from this,” he said. “I believe trade is the best way to get good medicines to the public, to help the environment and to help indigenous people.”
He and Mr. Cam pay growers here in Ninacaca a premium of 6 soles (about $2) for a kilo of maca, almost twice the going rate of 3 to 3.40 soles a kilo. They have set up a computer room at the Chakarunas warehouse and a free dental clinic, the town’s first.
Mr. Kilham is clearly adored by the locals in these desolate, wind-swept villages. On a recent visit here, shamans, maca growers and their families flocked to him. Since only maca and potatoes grow at this altitude, they are thankful Mr. Kilham is helping them sell their produce.

For the full story, see:
ANDREW DOWNIE. “On a Remote Path to Cures.” The New York Times (Tues., January 1, 2008): C1 & C5.
(Note: ellipses added.)
Source of photo: screen capture from slide show on online version of the NYT article quoted and cited above.

Income of Rich “Largely Invested in the Tools and Knowledge of Production”

In the passage below, Nobel-Prize-winner Vernon Smith brings our attention to an intriguing passage from Adam Smith’s “The Theory of Moral Sentiments” (1759).
In the development of new products from the process of creative destruction, new products sometimes start out as expensive, and are only purchased by the rich. This allows the new industry to survive until economies of scale, and more efficient production techniques are achieved. Eventually, as efficiencies are achieved, prices decline. An example would be the early years of the development of autmobiles. (One source for this example is Blue Ocean Strategy, pp. 193-194).

(p. A20) . . . the income of the rich is largely invested in the tools and knowledge of production, which provide future long-term value for everyone: “The rich only select from the heap what is most precious and agreeable . . . though they mean only their own conveniency . . . [and] . . . the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements.”

For the full commentary, see:
VERNON L. SMITH. “The Clinton Housing Bubble.” The Wall Street Journal (Tues., December 18, 2007): A20.

Creative Sparks Arise from Opportunistic Innovation

Source of book image:
http://ecx.images-amazon.com/images/I/51vovIVI5sL.jpg

(p. D16) One of the insights of “Strategic Intuition” is that business makes progress by following the opportunistic innovation model, while governments and international-aid agencies aim repetitively at rigid social goals. Such rigidity happens partly for a reason that Mr. Duggan is too polite to mention — bureaucrats, by nature, rarely give off a creative spark. Mr. Duggan prefers to emphasize a structural cause: The public demands solutions to problems of great social importance; thus bureaucrats get stuck with fixed objectives. Yet Mr. Duggan also shows that social progress often happens by emulating the opportunism of business. Among the most powerful of his examples is Muhammad Yunus’s invention of microcredit.
. . .
If there are still businessmen who feel compelled to follow a fixed-goal plan — missing out on the profits of opportunistic flexibility — then at least there is the free market to punish them. Market feedback is surely one big reason that we have so many innovative entrepreneurs. Where the old approach does most of the damage is in social policy, where the feedback is either fuzzy (as in domestic policy) or absent (foreign aid). Social policy could use a lot fewer commencement speakers and a lot more creative sparkers.

For the full review, see:
WILLIAM EASTERLY. “BOOKSHELF; Surprised by Opportunity.” The Wall Street Journal (Weds., November 14, 2007): D16.
(Note: ellipsis added.)

The reference to the Stratetic Intuition book is:
Duggan, William. Strategic Intuition: The Creative Spark in Human Achievement. New York: Columbia University Press, 2007.

Market Prices Send “the Right Signal to the Customer to Save Energy”

In the passage quoted below, the “commission” refers to China’s “National Development and Reform Commission.”

(p. A6) The commission estimates China’s energy efficiency is about 10% below that of developed countries because of obsolete technology. But many experts say Beijing’s policy priorities are a bigger obstacle.
Worries about social unrest and inflation led Beijing to put the brakes on pricing overhauls, at tremendous cost to state refiners PetroChina Co. and China Petroleum & Chemical Corp., known as Sinopec.
“Market prices are a very important and key issue because they send out the right signal to the customer to save energy,” said Yang Fuqiang, vice president of the Energy Foundation in Beijing.

For the full story, see:
David Winning. “Why Energy Efficiencies Prove Elusive in China.” Wall Street Journal (Tues., Nov. 6, 2007): A6.

Blindly Imitating a False Vision of Ancient Sculpture

“Trojan Archer from the Temple of Aphaia on Aegina.” Source of caption and photo: online version of the WSJ article quoted and cited below.

Ayn Rand’s Howard Roark in The Fountainhead railed against the mindless imitation of the classics, as embodied for instance in the Parthenon. In sculpture there has also been blind imitation of white classical figures, such as one that has recently been installed next to the Arts and Sciences Building on my campus at the University of Nebraska at Omaha.
One imagines that Rand and Roark would have been amused by the article quoted below, that shows that the classical sculptures were actually rich in color.

(p. D8) The Venus de Milo: white. The Apollo Belvedere: white. The Barberini Faun: white. The passing centuries may have cast their pall of grime, yet ever since the Renaissance rediscovered antiquity, our Platonic ideal of classical statuary has been bare marble: bleached, bone white.
The Greeks and Romans did not see it that way. The current show “Gods in Color: Painted Sculpture of Classical Antiquity” — through Jan. 20 at the Arthur M. Sackler Museum on Harvard University’s campus — makes a bold attempt to set the record straight. On view are replicas painted in the same mineral and organic pigments used by the ancients: pulverized malachite (green), azurite (blue), arsenic compounds (yellow, orange), cinnabar or “dragon’s blood” (red), as well as charred bone and vine (black). At first glance and quite a while after, the unaccustomed palette strikes most viewers as way over the top. But few would deny that these novelties — archers, goddesses, mythic beasts — look you straight in the eye.
. . .
By the 18th century, practitioners of the then-new science of archaeology were aware that the ancients had used color. But Johann Joachim Winckelmann, the German prefect of antiquities at the Vatican, preferred white. His personal taste was enshrined by fiat as the “classical” standard. And so it remained, unchallenged except by the occasional eccentric until the late 20th century.

For the full story, see:
MATTHEW GUREWITSCH. “CULTURAL CONVERSATION With Vinzenz Brinkman; Setting the Record Straight About Classical Statues’ Hues.” The Wall Street Journal (Tues., December 4, 2007): D8.
(Note: ellipsis added.)

For-Profit Schools Teach Math Better than Non-Profit or Government Schools

(p. A23) When for-profit management of public schools was first proposed in Philadelphia six years ago, many in that city were extremely skeptical, if not aggressively hostile. So the Philadelphia School Reform Commission, the entity responsible for the innovation, gave only the 30 lowest performing schools to for-profit companies, while another 16 were given to nonprofit organizations, including two of the city’s major universities (Temple and the University of Pennsylvania). Others were reorganized by the school district itself.
In effect, a competition was run among the three types of management — for-profit, nonprofit, and government-run. Four years into the race, here are the results: Students at schools managed by for-profit firms were roughly six months ahead in math than would be expected had the schools remained in the hands of the school district. In reading, students in schools managed by for-profit firms were two months further along than they would have been if the schools had been under district control, though that difference was not large enough to give us statistical certainty. Meanwhile the nonprofits — and the school district’s own reorganized schools — did no better than expected.
. . .
Though we believe our methodology to be state of the art, our findings will nonetheless be controversial, because they contradict a prior study by the RAND Corp. in February, which found no impact of private management on student performance. The RAND study, however, failed to separate out the schools managed by the for-profit firms from those managed by the nonprofit organizations. In our study, too, management effects are nil when the two are mixed together, as the positive impacts of for-profit firms are canceled out by the negative impacts of nonprofit organizations.

For the full commentary, see:
Paul E. Peterson and Matthew M. Chingos. “Educational Rewards.” Wall Street Journal (Weds., Nov. 7, 2007): A23.
(Note: ellipsis added.)

Lomborg Shows How Kyoto Protocol Wastes Money

Source of book image:
http://images.tdaxp.com/tdaxp_upload/cool_it_md.jpg

(p. D7) Standing in the practical middle is Bjorn Lomborg, the free-thinking Dane who, in “The Skeptical Environmentalist” (2001), challenged the belief that the environment is going to pieces. Mr. Lomborg is now back with “Cool It,” a book brimming with useful facts and common sense.
Mr. Lomborg–“liberal, vegetarian, a former member of Greenpeace,” as he describes himself–is hard to fit into any pigeonhole. He believes that global warming is happening, that man has caused it, and that national governments need to act. Yet he also believes that Al Gore is bordering on hysteria, that some global-warming science has been distorted and hyped, and that the Kyoto Protocol and other carbon-reduction schemes are a terrible waste of money. The world needs to think more rationally, he says, about how to tackle this challenge.
. . .
Mr. Lomborg cites studies showing that by implementing Kyoto–at a cost of trillions of dollars–we might be able to achieve a 3% reduction in fluvial and coastal flooding damages. If we instead adopted smart flood policies–e.g., an end to public subsidies that encourage people to settle in flood plains, a shrewder use of levees–we could achieve a 91% reduction in damages at a fraction of the Kyoto cost.

For the full review, see:
KIMBERLEY A. STRASSEL. “BOOKSHELF; A Calm Voice in a Heated Debate.” The Wall Street Journal (Thursday, September 13, 2007): D7.
(Note: ellipsis added.)

The Danger of “Misconceived Pessimism”

In the full version of the commentary quoted below, the authors mention four lines of research that they believe hold promise for the future: vaccines, epigenetics, targeted therapies, and cancer “stem cells.”

(p. A17) This week, the National Cancer Institute, in conjunction with other organizations that track cancers, reported that the death rate from cancer declined from 2002-2004 by an average of 2.1% per year. This is an improvement over the 1.1% annual declines from 1993-2002 and is very good news indeed. Each 1% decline represents 5,000 people living rather than dying, and, of course, this figure is compounded each year.
While some part of the declining death rate from cancer is the consequence of screening, much is the result of greatly improved treatments. And we believe that the successes achieved to date are only the modest beginning of a revolution in the research into and treatment of cancer.
During the last half of the 20th century, almost all treatments of cancers involved forms of chemotherapy in which cancerous and normal tissues were bombarded with nonselective cytoxic drugs. These drugs killed all cells, healthy as well as malignant. Worse, they did not kill all cancer cells, so the cancer progressed — leading to the pessimism dominant in people’s minds today, a reflection of years of articles and opinion pieces in the popular press expressing the view that “the war on cancer” has been waged incorrectly, if not lost.
Now, however, new therapeutic modes are in play, based on better understandings of cancers and great advances in technologies.
. . .
The danger is that misconceived pessimism might result in a loss of popular moral support for the revolutionary new approaches to cancer research and treatment.

For the full commentary, see:
Samuel Waxman and Richard Gambino. “The New Ways We Fight Cancer.” Wall Street Journal (Oct 18, 2007): A17.
(Note: ellipsis added.)

Lower Taxes Encourage Entrepreneurship in Ireland

“Feargal Mooney, left, is chief operating officer for Web Reservations International. Ray Nolan is the founder and chief executive officer. Web Reservations provides booking and management for hostels that cater to economy travelers.” Source of the caption and photo: online version of the NYT article quoted and cited below.

(p. C8) DUBLIN — Ireland is now alive with enthusiasm for entrepreneurs, who seemingly rank just below rock stars in popularity.
. . .
The relatively new emphasis on entrepreneurs in Ireland is the culmination of nearly four decades of government policies that have lifted the economy from centuries of poverty to modern prosperity.
The change began when Ireland entered the European Union in 1973. In subsequent years, the government rewrote its tax policies to attract foreign investment by American corporations, made all education free through the university level and changed tax rates and used direct equity investment to encourage Irish people to set up their own businesses.
“The change came in the 1990s,” said James Murphy, founder and managing director of Lifes2Good, a marketer of drugstore products for muscle aches, hair loss and other maladies. “Taxes and interest rates came down, and all of a sudden we believed in ourselves.”
The new environment also encouraged Ray Nolan, who founded Raven Computing in 1989 to provide software for lawyers to keep track of billable hours. He sold that company and founded another that created software for companies to manage billing and receipts. And in 1999, he founded Web Reservations International to provide booking and property management for hostels that cater to backpackers and economy travelers.
“Hostel owners needed to keep track of people sharing rooms, and bookings for Americans coming to Dublin for three nights,” said Feargal Mooney, chief operating officer of Web Reservations. “Hostel accommodations go for 10 to 20 euro a night,” he said, or $15 to $30 at today’s exchange rates, “so booking reservations in them wasn’t profitable for the big travel companies.”

For the full story, see:
JAMES FLANIGAN. “ENTREPRENEURIAL EDGE; Ireland Uses Incentives To Help Start-Ups Flourish.” The New York Times (Thurs., January 17, 2008): C8.

(Note: ellipsis added.)