Monday, November 08, 2004
What I'm Reading
I saw this essay on Spiked-Online linked to from Marginal Revolution. Every word is a joy to read.
Getting Over It
Interesting article by Malcolm Gladwell about human resilience.
People are bad at forecasting their emotions—at appreciating how well, under most circumstances, they will recover. Not long ago, for instance, Gilbert, Wilson, and two other researchers—Carey Morewedge and Jane Risen—asked passengers at a subway station in Cambridge, Massachusetts, how much regret they thought they would feel if they arrived on the platform just as a train was pulling away. Then they approached passengers who really had arrived just as their train was leaving, and asked them how they felt. They found that the predictions of how bad it would feel to have just barely missed a train were on average greater than reports of how it actually felt to watch the train pull away. We suffer from what Wilson and Gilbert call an impact bias: we always assume that our emotional states will last much longer than they do. We forget that other experiences will compete for our attention and emotions. We forget that our psychological immune system will kick in and take away the sting of adversity. “When I talk about our research, I say to people, ‘I’m not telling you that bad things don’t hurt,’” Gilbert says. “Of course they do. It would be perverse to say that having a child or a spouse die is not a big deal. All I’m
saying is that the reality doesn’t meet the expectation.”
Medicare Covers New Treatments With a Catch
Medicare is going to start covering new and expensive treatments in exchange for getting companies to pay for studies on which methods actually work. Hopefully this will provide hard data about the effectiveness of new treatments, which can eventually be used to stop paying for the ones that don't work.
The new initiatives began this year when Dr. McClellan, who is both an internist and an economist, decided that evaluating treatments for elderly Americans falls under Medicare's purview to pay for whatever is medically necessary. If the treatment does not work, he argues, then it really is not medically necessary, and Medicare should not be paying.
Over the past six months, he has been fundamentally transforming Medicare's scope by offering to pay for a number of new and expensive treatments and diagnostic tests - ranging from $30,000-a-dose cancer drugs to brain scans to diagnose Alzheimer's - but with a catch. Patients can only have them if they enter into studies that evaluate how well they work. And someone other than Medicare will have to pay for those studies.
In the past Medicare just paid the bills or said no to treatments. Now, with a flood of promising but astronomically expensive treatments and little data on how they work in the real world, Medicare has decided to use its 41 million beneficiaries to get some answers. And it is using the threat of refusing to pay unless patients are in a study as a cudgel to get companies or foundations or professional groups to pay for the research. The goal, Dr. McClellan said, is better and more cost-effective medicine.
High Prices
And here we tie together the two previous articles: An article about drug prices by Malcolm Gladwell.
I was furious listening to the show because the person to represent the "other" side of the debate was completely missing key points. It was just this lame, lop-sided argument. Of course, many of my holdings are still in a single drug company, so I've been following the industry for a long time.
Naturally we should expect to allow pollution from development, but that doesn't mean pollution should grow without any limits at all. (In the limit, that would leave the world looking worse than the Matrix 3 had it.) Cap and trade is a nice idea and it works. We've implemented it before and it hasn't stopped growth.
If only he had read a serious book like "Cradle to Cradle". It's not a complete vision, but it's a new paradigm that would be a joy to live in. In fact, such ideas could help growth enormously, instead of hurting it. And, if that's the case, we'll see more and more of the ideas in Cradle to Cradle in the products we buy. (Perhaps nanotech or biotech will be the final missing piece. Remember, nature is the most efficient consumer of energy: the more we copy nature, as nano and biotech will do, the more effective we will be. Further, there is no such thing as "waste" in nature.)
I suppose what's most offensive is that the powers that be don't give the environmentalists a fair shot of letting the market value the environment. With cap and trade, pollution contracts (or, equivalently, taxes), the market can decide and negotiate the costs of these negative externalities. We just don't have the conditions for the Coase theorem to solve the problem for us.
The most extreme (i.e., strawmen) environmentalists give the cost of negative externalities as infinitely harmful, while our current policy for many important areas give the cost of pollution as being free. The real value is a finite, but postive number. Naturally, a market can figure out what the real value is, but an environmentalist like myself can't even put $1000 away into a share of a pollution contract. Even though you personally might not mind pollution, it does have a social cost to others and a market should make the decision about how much that cost really is. These contracts make for both good economics and good environmental policy. The true tragedy is that they are poor politically. (Let's hope McCain-Lieberman, or something like it, will one day pass.)
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