December 2012 – Page 3 – artdiamondblog.com

Health Care Costs Can Be Lowered by Less Waste and More Cost-Reducing Innovation

(p. 234) Melinda Beeuwkes Buntin and David Cutler discuss “The Two Trillion Dollar Solution: Saving Money by Modernizing the Health Care System.” “Two sorts of savings are possible in health care. The first is eliminating waste and inefficiency. The most commonly cited estimate is that 30 percent of the money spent on medical care does not buy care worth its cost. Medicare costs per capita in Minneapolis, for example, are about half those in Miami, yet Miami does not have better health outcomes. International comparisons yield the same conclusion. . . . Second, reform might stimulate cost-reducing innovation instead of the continuous cost increases that accompany current innovation. For nearly 20 years, scholars have argued that generous reimbursement policies for medical care have led to innovations that almost always increase health care costs. Changing that dynamic by investing in research about what works and rewarding health care providers who choose efficient treatments could have a dramatic effect on cost growth. . . . Reducing costs by 30 percent will take time and effort, but it is not inconceivable over the long term. Experience in the health care sector and other industries suggests that cost reductions on the order of 1.5-to-2.0 percentage points per year are within reach.”

Buntin and Cutler as quoted in:
Taylor, Timothy. “Recommendations for Further Reading.” Journal of Economic Perspectives 24, no. 2 (Fall 2009): 231-38.
(Note: ellipses in original.)

The Buntin and Cutler report is:
Buntin, Melinda Beeuwkes, and David Cutler. “The Two Trillion Dollar Solution: Saving Money by Modernizing the Health Care System.” Washington, D.C.: Center for American Progress, 2009.

With Scorned Ideas, and Without College, Inventor and Entrepreneur “Ovshinsky Prevailed”

“Stanford R. Ovshinsky and Iris M. Ovshinsky founded Energy Conversion Laboratories in 1960.” Source of caption and photo: online version of the NYT obituary quoted and cited below.

(p. A23) Stanford R. Ovshinsky, an iconoclastic, largely self-taught and commercially successful scientist who invented the nickel-metal hydride battery and contributed to the development of a host of devices, including solar energy panels, flat-panel displays and rewritable compact discs, died on Wednesday [October 17, 2012] at his home in Bloomfield Hills, Mich. He was 89.
. . .
His ideas drew only scorn and skepticism at first. He was an unknown inventor with unconventional ideas, a man without a college education who made his living designing automation equipment for the automobile industry in Detroit, far from the hotbeds of electronics research like Silicon Valley and Boston.
But Mr. Ovshinsky prevailed. Industry eventually credited him for the principle that small quantities or thin films of amorphous materials exposed to a charge can instantly reorganize their structures into semicrystalline forms capable of carrying significant current.
. . .
In 1960, he and his second wife, the former Iris L. Miroy, founded Energy Conversion Laboratories in Rochester Hills, Mich., to develop practical products from the discovery. It was renamed Energy Conversion Devices four years later.
Energy Conversion Devices and its subsidiaries, spinoff companies and licensees began translating Mr. Ovshinsky’s insights into mechanical, electronic and energy devices, among them solar-powered calculators. His nickel-metal battery is used to power hybrid cars and portable electronics, among other things.
He holds patents relating to rewritable optical discs, flat-panel displays and electronic-memory technology. His thin-film solar cells are produced in sheets “by the mile,” as he once put it.
. . .
“His incredible curiosity and unbelievable ability to learn sets him apart,” Hellmut T. Fritzsche, a longtime friend and consultant, said in an interview in 2005.

For the full obituary, see:
BARNABY J. FEDER. “Stanford R. Ovshinsky Dies at 89, a Self-Taught Maverick in Electronics.” The New York Times (Fri., October 19, 2012): A23.
(Note: ellipses and bracketed date added.)
(Note: the online version of the article was dated October 18, 2012.)
(Note: in the first sentence of the print version, “hybrid” was used instead of the correct “hydride.”)

“What Marketing Guys Are: Paid Poseurs”

(p. 152) Jobs had asked Hertzfeld and the gang to prepare a special screen display for Sculley’s amusement. “He’s really smart,” Jobs said. “You wouldn’t believe how smart he is.” The explanation that Sculley might buy a lot of Macintoshes for Pepsi “sounded a little bit fishy to me,” Hertzfeld recalled, but he and Susan Kare created a screen of Pepsi caps and cans that danced around with the Apple logo. Hertzfeld was so excited he began waving his arms around during the demo, but Sculley seemed underwhelmed. “He asked a few questions, but he didn’t seem all that interested,” Hertzfeld recalled. He never ended up warming to Sculley. “He was incredibly phony, a complete poseur,” he later said. “He pretended to be interested in technology, but he wasn’t. He was a marketing guy, and that is what marketing guys are: paid poseurs.”

Source:
Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

“It Isn’t What You Know that Counts–It Is How Efficiently You Can Refresh”

Source of book image: online version of the WSJ review quoted and cited below.

(p. A17) Knowledge, then, is less a canon than a consensus in a state of constant disruption. Part of the disruption has to do with error and its correction, but another part with simple newness–outright discoveries or new modes of classification and analysis, often enabled by technology.
. . .
In some cases, the facts themselves are variable. . . .
. . .
More commonly, however, changes in scientific facts reflect the way that science is done. Mr. Arbesman describes the “Decline Effect”–the tendency of an original scientific publication to present results that seem far more compelling than those of later studies. Such a tendency has been documented in the medical literature over the past decade by John Ioannidis, a researcher at Stanford, in areas as diverse as HIV therapy, angioplasty and stroke treatment. The cause of the decline may well be a potent combination of random chance (generating an excessively impressive result) and publication bias (leading positive results to get preferentially published).
If shaky claims enter the realm of science too quickly, firmer ones often meet resistance. As Mr. Arbesman notes, scientists struggle to let go of long-held beliefs, something that Daniel Kahneman has described as “theory-induced blindness.” Had the Austrian medical community in the 1840s accepted the controversial conclusions of Dr. Ignaz Semmelweis that physicians were responsible for the spread of childbed fever–and heeded his hand-washing recommendations–a devastating outbreak of the disease might have been averted.
Science, Mr. Arbesman observes, is a “terribly human endeavor.” Knowledge grows but carries with it uncertainty and error; today’s scientific doctrine may become tomorrow’s cautionary tale. What is to be done? The right response, according to Mr. Arbesman, is to embrace change rather than fight it. “Far better than learning facts is learning how to adapt to changing facts,” he says. “Stop memorizing things . . . memories can be outsourced to the cloud.” In other words: In a world of information flux, it isn’t what you know that counts–it is how efficiently you can refresh.

For the full review, see:
DAVID A. SHAYWITZ. “BOOKSHELF; The Scientific Blind Spot.” The Wall Street Journal (Mon., November 19, 2012): A17.
(Note: ellipses added, except for the one internal to the last paragraph, which was in the original.)
(Note: the online version of the article was dated November 18, 2012.)

The book under review, is:
Arbesman, Samuel. The Half-Life of Facts: Why Everything We Know Has an Expiration Date. New York: Current, 2012.

Early Retirement Reduces Cognitive Ability

(p. 136) Early retirement appears to have a significant negative impact on the cognitive ability of people in their early 60s that is both quantitatively important and causal. We obtain this finding using cross-nationally comparable survey data from the United States, England, and Europe that allow us to relate cognition and labor force status. We argue that the effect is causal by making use of a substantial body of research showing that variation in pension, tax, and disability policies explain most variation across countries in average retirement rates.

Further exploration of existing data and new data being collected would allow a considerably deeper exploration of the roles of work and leisure in determining the pace of cognitive aging. For example, the HRS contains considerable information on how respondents use their leisure time that would allow both cross-sectional and longitudinal analysis of changes in cognitive exercise that are associated with (p. 137) retirement. In addition, detailed occupation and industry data could be used to understand differences in the pace of technical change to which workers must adjust during the latter part of their careers. Also, in the 2010 wave, the HRS will be adding measures of other components of fluid intelligence. Future work in this area should be able to separate the effects of the “unengaged lifestyle hypothesis” (that early retirees suffer cognitive declines because the work environment they have left is more cognitively stimulating than the full-time leisure environment they have entered) from the “on-the-job retirement hypothesis” (which holds that incentives to invest among older workers are significantly reduced when they expect to retire at an early age).

During the past decade, older Americans seem to have reversed a century-long trend toward early retirement and have been increasing their labor force participation rates, especially beyond age 65. This is good news for the standard of living of elderly Americans, as well as for the fiscal balance of the Social Security and Medicare systems. Our paper suggests that it may also be good news for the cognitive capacities of our aging nation.

Source:
Rohwedder, Susann, and Robert J. Willis. “Mental Retirement.” Journal of Economic Perspectives 24, no. 1 (Winter 2010): 119-38.

“We Don’t Need No Thought Control”

“In Hong Kong, protesters march against Beijing’s introduction of ‘Chinese patriotism classes’ in schools.” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. A11) Consider the . . . scene in Hong Kong, where tens of thousands of parents, teachers and students protested an effort by Beijing to re-educate the inhabitants of the former British colony, which reverted to the mainland in 1997.

Hong Kong people objected to a government-funded booklet titled, “The China Model,” which was supposed to educate them in the patriotic ways of the mainland. It celebrates China’s one-party Communist regime as “progressive, selfless and united” while criticizing the U.S. political system as having “created social turbulence.”
There is no reference to the Cultural Revolution or Tiananmen Square–history also suppressed on the mainland, where the Web is largely censored. The booklet even encourages Hong Kong people to learn how to “speak cautiously,” a highly unlikely development to those of us who have lived in Hong Kong with its often pungently plain-spoken citizens.
The chairman of the pro-Beijing China Civic Education Promotion Association in Hong Kong, Jiang Yudui, tried to defend the booklet by saying, “If there are problems with the brain, then it needs to be washed, just like dialysis for kidney patients.”
This led the Hong Kong education secretary to back away, assuring that, “Brainwashing is against Hong Kong’s core values and that’s unacceptable to us.” Meanwhile, Hong Kong’s sophisticated protesters carried banners that included lyrics from British rock group Pink Floyd, “We don’t need no thought control.”

For the full commentary, see:
L. GORDON CROVITZ. “INFORMATION AGE; Brainwashing in the Digital Era.” The Wall Street Journal (Mon., August 6, 2012): A11.
(Note: ellipsis added.)
(Note: the online version of the article was dated August 5, 2012.)

Progress of Economic Science on Central Banking

The passage below is a comment by former head of the Fed, Paul Volcker.

(p. 25) . . . I recently commented to some of my economist friends that I’m not aware of any large contribution that economic science has made to central banking in the last 50 years or so.

Our ability to forecast is still very limited. The old issues of the relative role of fiscal and monetary policies are still debated. Markets are certainly more complex, and some of the old approaches toward monetary control seem less relevant. Recent events have certainly illustrated limitations in our understanding of the economy.
The advent of floating exchange rates, which partly reflects a shift in academic thinking, has certainly been important, but the underlying problems of policy seem familiar.

Stern, Gary H., interviewer. “Paul A.Volcker in Conversation with Gary H. Stern.” The Region (September 2009): 18-29.
(Note: ellipsis added.)

Isaacson’s “Steve Jobs” Tells Us Much About the Innovative Project Entrepreneur

Source of book image: http://www.internetmonk.com/wp-content/uploads/walter-isaacson-steve-jobs1.png

Steve Jobs is one of my favorite examples of what I call the “project entrepreneur.” Walter Isaacson has written a fascinating biography of Jobs, full of memorable examples for any student of the innovative entrepreneur.
During the next few weeks, I will occasionally add entries that quote some of the more important or thought-provoking passages.

The book under review is:
Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

Business Cycles May Arise from “the Summation of Random Causes,” Rather than from Creative Destruction

The Slutsky result summarized below would seem to imply that you can explain business cycles without fingering creative destruction as the culprit, as Schumpeter had seemed to do. The costs of creative destruction are thus reduced, and the case for creative destruction strengthened.

(p. 232) Phil Davies and Joe Mahon investigate “The Meaning of Slutsky.” “A middleaged professor working at a Moscow think tank, [Eugen] Slutsky was virtually unknown to economists in Europe and the United States when he published his landmark paper on cyclical phenomena in 1927. In a bold statistical experiment, Slutsky demonstrated that random numbers subjected to statistical calculations similar to those used to reveal trends in economic time-series formed wavelike patterns indistinguishable from business cycles. The implication was that a similar stochastic process–‘the summation of random causes,’ as Slutsky described it–might be at work in the actual economy, causing prosperity to ebb and flow without the agency of sunspots, meteorological patterns or other cyclical forces. ‘That was a hell of an idea,’ said Robert Lucas, a University of Chicago economist who pioneered modern business cycle theory, in an interview. ‘It was just a huge jump from what anyone had done.’

Source:
Taylor, Timothy. “Recommendations for Further Reading.” Journal of Economic Perspectives 24, no. 2 (Spring 2010): 227-34.
(Note: bracketed name in original.)

The published version of the article summarized by Taylor is:
Davies, Phil, and Joe Mahon. “The Meaning of Slutsky.” The Region (Dec. 2009): 13-17, 42-46.

Garcia “Wanted to Get an Education and Get Out of” the “Sustainable” Life

“In a straightforward sense, Mr. García, 44, is a Mexican ecologist. More broadly, though, he is a self-appointed emissary from the land once known as Pimería Alta, an interpreter of its culture, plants and people.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. D6) Over the weekend, Mr. García would be driving back to his family seat in the mission town of Magdalena de Kino, Mexico. In a way, his personal mission is to recreate the orchards he knew there. He has started with dozens of seedlings in the backyard of the small ranch house that he shares with his girlfriend, Dena Cowan, a Spanish-language interpreter and videographer. (The couple recently produced a documentary, in Spanish and English, about the Kino Heritage Fruit Trees Project called “Tasting History.”)

Yet he remembered the orchards with something other than simple nostalgia.
As a child, he packed boxes of fruit to load onto his uncle’s truck. “My father had this farm that he was renting, probably two acres,” Mr. García recalled. By necessity, “the only things we bought from the store were salt, sugar, coffee and kerosene,” he said. “Everything else we produced.”
“Our mother, she made our underwear out of the wheat sacks,” he continued. “My father used to make these homemade shoes for my brothers: leather, with used tires on the sole. They would hide them in the river on the way to school and then go to school barefooted.” Better that, he recalled, than let classmates see their privation.
By the time Mr. García reached junior high, his older sister has become a teacher and the family’s lot had improved. They installed indoor plumbing, for a start. There was nothing trendy about what he ironically calls their “sustainable” years. “I got the tail end,” Mr. García said. “But I got enough to realize how hard work it is. I learned enough to realize I wanted to get an education and get out of that life.”

For the full story, see:
MICHAEL TORTORELLO. “Seeds of an Era Long Gone.” The New York Times (Thurs., November 22, 2012): D1 & D6.
(Note: the online version of the article was dated November 21, 2012.)