Author Archives: mash

Valuing the intellectual commons

Ubuntu is a popular distribution of the Free/Libre/Open-Source Software (FLOSS) GNU/Linux computer system.

Using the COCOMO model to estimate the cost of producing computer code of specified length and complexity, a linux enthusiast estimated the actual cost to produce the software in the Ubuntu repositories. The Ubuntu software repository contains over 121 million lines of code, and the estimated cost to produce it is over 7 billion dollars.

Is this a lot?

On the one hand, it’s an incredible achievement for volunteered, uncoerced, even joyful labor. And the COCOMO approach seemed like a clever way to value this important part of the intellectual commons.

On the other hand, Microsoft’s market capitalization is 280 Billion, and in my opinion, Ubuntu does almost everything that Microsoft can do. (Well, not really; Ubuntu does not compete with the Microsoft X-Box gaming system or the Microsoft network, but Ubuntu does offer a complete computer system, including office software, web browser, operating system, multimedia viewers, etc.) So why do the valuations differ by a factor of 40?

Thanks to Kristian Hermansen of the UMassLUG (UMass Linux Users’ Group) for the lead.

Afraid to ask or not, all you really wanted to know about the recent Fed liquidity injection…

Check out former FRBoNY Director of Research Stephen Cecchetti’s F.A.Q. on the Fed’s emergency injection of liquidity in early August using mortgage-security backed repurchase agreements (repos). The explanation is really clear, complete with illustration. I am a bit skeptical of the claim

The Fed isn’t spending the money on bailing out banks, hedge funds, or helping rich people.

but it’s otherwise an excellent piece that describes the mechanism, the scale, and the reasons.

Right-to-Know: No-Bid Federal Contracts and Other Federal Spending is a new website sponsored by effective OMB watchdog organization and Right-to-Know enforcer, which keeps an eye on the deregulatory manias of recent administrations. The new website allows visitors to track Federal grants and contracts using various search criteria, e.g., location of the recipient (how about “Halliburton”), place of performance (try “Iraq”), sponsoring agency (“Defense”), and whether or not the contract was open to competitive bidding.

The Federal government was supposed to produce such a website itself, but Senator T. Stevens (Alaska) put a secret hold on the legislation. Although the hold was eventually withdrawn, the government still has not come up with the promisted user-friendly database.

Here’s the Halliburton search. Notice that you can refine the search by asking for more years and more detail.

Leave comments that describe your searches. Ethanol? Pharmaceuticals?

Generous welfare states are fine for growth

The main finding of Peter Lindert’s intriguing 2003 paper, “Why the welfare state looks like a free lunch” (a warm-up for his 2004 book Growing Public: Social Spending and Economic Growth since the Eighteenth Century is that generous social democratic welfare states, with a variety of universalist and means-tested safety net and family support programs, grow just as robustly as stingy laissez-faire states. Here’s the key summary from the abstract:

There is no clear net GDP cost of high tax-based social spending on GDP, despite a tradition of assuming that such costs are large.

The finding should obviously be plastered on bumper stickers, refrigerator magnets, and dorm-room walls and played continuously on a loudspeaker outside the Chamber of Commerce, Club for Growth, Council on Competitiveness, etc. The welfare state doesn’t just look like a free lunch, it is a free lunch, at least from the standpoint of national aggregates.

Class conflict may mean that it’s hard for us to order that free lunch in the U.S. anytime soon, but the barrier between us and the free lunch doesn’t come in the obvious way. Read more

The Inequality and Health Debate: What do we learn from the twentieth-century in the developed world?

An important debate in the social health literature is whether more inequality causes worse health. At some later date I’ll post a bibliography, or maybe commenters can help. In any case the list of publications is long, the contributors illustrious, and the findings varied and at odds with each other. Some of the most important papers representing a range of findings include those by Deaton, Deaton and Lubotsky, Mellor and Milyo, Lynch, et al., Kawachi, Subramanian, et al., Navarro, et al., Wilkinson, et al., and Marmot, et al.

Note that the debate is about the effect of inequality, per se, on health. Everybody knows that being rich reduces mortality and being poor increases it. The relationship between income and health (mortality, infant mortality, life expectancy, morbidity) is so well known in the literature that it is simply known as “the gradient.” It obtains at the macro and micro levels in dozens of studies. For example, let me quote Angus Deaton, who is BTW an inequality-mortality skeptic, “Men in the United States with family incomes in the top 5 percent of the distribution in 1980 had about 25 percent longer to live than did those in the bottom 5 percent. Proportional increases in income are associated with equal proportional decreases in mortality throughout the income distribution” (Angus Deaton “Policy Implications Of The Gradient Of Health And Wealth”). But I digress.

There are three basic channels through which an association between inequality and health could occur. The first two are causal in that social inequality affects individual health.

  1. Direct. Inequality creates stress, which is bad for health.
  2. Indirect. Inequality disrupts the production of health-supporting public goods or causes the production of health-reducing public bads, which is bad for health.
  3. Artifactual. More income improves the health of the poor more than it improves the health of the rich. (The health-income relationship is concave.) A more unequal society will have worse average health than a more equal society with the same mean income because the health gain to the rich from being much richer is not as great as the health loss to the poor from being much poorer. Note that individual income only affects individual health, but the distribution of income affects average health.

A fairly recent entry in the field is Leigh and Jencks, “Inequality and mortality: Long-run evidence from a panel of countries” (Journal of Health Economics 26 (2007) 1-24). Here is a link to a working paper version which is very similar to the published version. In a nutshell, the income share of the richest 10 percent of the population is the measure of inequality, and life expectancy at birth and infant mortality are the two main measures of health outcome. Read more

Socialized Medicine: America’s best health-care organization?

The 14,500 doctors and 58,000 nurses of this health-care organization serve 7.6 million enrollees, delivering care that outperforms both commericial insurance and Medicare–let alone poor, underfunded Medicaid–on a host of indicators of quality of process and outcome. While Medicare costs increased from $5,000 to $6,800 (36 percent) per patient-year between 1996 and 2004, its costs stayed constant at $5,000 per patient-year. And the patients receiving this high-quality, moderate-cost care are disproportionately poor and disabled.

Is it Kaiser Permanente? Is it a new for-profit chain of health clinics? No, it’s the Veterans Health Administration (VHA).
Read more

The American Vacation Deficit

As summer rolls around, there’s been a spike in interest in the American vacation deficit.

David Moberg, writing in the excellent progressive bi-weekly In These Times, surveys the field in “What Vacation Days?” Since we’re interested in policy, here’s the punch line,

Why do workers in other rich countries have more paid time off? Mainly because laws demand employers provide it. The European Union requires its members to set a minimum standard of four weeks paid vacation (covering part-time workers as well). Finland and France require six weeks paid vacation, plus additional paid holidays. Most countries require workers to take the time off and employers to give them vacation at convenient times. Some governments even require employers to pay bonuses so workers can afford to do more than sit at home on vacation. On top of that, unions in Europe and other rich industrialized countries—whose contracts cover up to 90 percent of the workforce—typically negotiate additional time off. Meanwhile, the standard workweek is slightly shorter in many European countries, and workers retire earlier with better public pensions.

For the heavy quantitative lifting, Moberg cites a survey of comparative vacation legislation, “No-Vacation Nation” recently published by CEPR (May 2007). The summary is here and the full report is here.

This report reviewed international vacation and holiday laws and found that the United States is the only advanced economy that does not guarantee its workers any paid vacation or holidays. As a result, 1 in 4 U.S. workers do not receive any paid vacation or paid holidays. The lack of paid vacation and paid holidays in the U.S. is particularly acute for lower-wage and part-time workers, and for employees of small businesses.
Read more

Notes on a health reform plan

Berkeley economist Brad DeLong offers a qualified (“coming from a guy who is not a real health economist but has an undeserved reputation because he was good at translating the economese spoken by real health economists”) proposal for health care reform. Here are the highlights:

  • 20% Deductible/Out of Pocket Cap
  • Single-Payer for the Rest
  • Sin Taxes [and public-health education, exhortation, etc.]
  • Serious Research on Best Public-Health, Chronic-Disease, and Hospital Practices

Here’s what’s good, what’s bad, and what can be improved:What’s good?

  • Single payer for the rest. Much of the current health care mess in the U.S. comes directly from the competitive private insurance market. Insurance companies reap rewards for avoiding sick patients and have little incentive to provide continuity of care (follow-up on patients with chronic illness, preventative care, etc.). Administrative costs and profits are also ridiculously high. Single payer, which means that the government or a quasi-governmental trust is the unique, universal insurer, is the obvious solution, a proven winner in one form or another in almost every other industrialized country.
  • Serious research (and development). Medical and information technology could be applied much more effectively to monitor and to ameliorate chronic diseases and other health risks. We can learn more at the cutting edge, we can better disseminate and reward the adoption of demonstrated good practices, and we can help people monitor and improve their own health (while respecting their privacy).

What’s bad?

  • 20% Deductible/Out of Pocket Cap. DeLong’s proposal would tax 20 percent of income for health care: 15 percentage-points worth would go into a personal health-spending account and 5 percentage-points worth would go into a health insurance pool. The phrase “for the rest” following single payer means that complete insurance would apply all health care problems in excess of 15 percent of income. At least there would be some means testing but there is little else to recommend this proposal. The impetus for high deductible is that patients should be encouraged to shop around and competitive pressures will contain costs. Otherwise, patients, or more likely their providers, face a moral hazard to overuse care. Some so-called cost sharing is compatible with single-payer, but here’s the problem. The 5 percentage points of income isn’t enough to provide insurance to people who need it. Health problems and the associated costs come in very concentrated bursts. According to the director of social scientific research at the Federal agency responsible for health research (AHRQ), “Nearly 30 percent of health care expenditures are accounted for by the top 1 percent of spenders, while more than half of all health care expenditure are accounted for by the top 5 percent of spenders.” Because health-care expenditure is about 16 percent of all income, the top 1 percent of spenders alone use up almost the entire 5-percent insurance pool (because 30 percent of 16 percent is 4.8 percent). There is essentially nothing left to pay for unexpected health care needs for the other 99 percent of the population beginning with the next sickest 4 percent. So we don’t need to debate the morality or excoriate the immorality of the “first out-of-pocket, and only then insurance” approach. Nor do we need to offer (perfectly reasonable albeit difficult to defend) opinions such as, “No one gets excess health care for fun.” Health care costs cannot be contained by widespread cost-sharing because of their fundamental distribution.

What can be improved?

  • Sin Taxes [and public-health education, exhortation, etc.] Reinvigorating the public-health approach makes lots of sense. DeLong smartly suggests increasing the employment, skills, and portfolio of nurses, other primary-care providers, health educators, health-care paraprofessionals, nutritionists, et al. A lot of the public-health problem may come from the time bind that Americans face. When the health educator knocks at the door (see the proposal), will anyone be home? We are more likely to be commuting, alone, in a car, to a distant job with long hours. The proposed sin taxes should include unequal incomes and long hours. And public health should include a vacation.