Chargemasters and Used Cars

Recently there's been a lot of discussion about the use of chargemasters in hospitals. It's an often baseless fiction used for bargaining, and the growth in healthcare costs has been attributed to it. This bothers people, not without reason.

Other industries use price shrouding, but this is something altogether different. The situation is most similar to car salesmanship. Opaque pricing, line items that no one can explain, made-up additional charges, and initial prices that everyone knows are not the final prices. This results in consumers generally not being happy at the end of the car-buying process, and a poor reputation for car salespeople. Why is this? Is it just totally path-dependent cultural inertia that has made the pricing in these industries so bizarre and (some would say) unethical? Or is there something inherent to each that encourages it? There are similarities and differences.

In both, people are making large infrequent purchases. They're spending a lot of money without experience in this specific domain. Furthermore they may not know what they should be paying in the first place; this problem is worse for healthcare consumers. When you buy a car you can get some idea what this Toyota model is going for in this area by doing research online, although the salesman hopes you haven't, and you'll have some ballpark idea even without that research - whereas in the hospital, you certainly have no idea what a paracentesis should cost in your city. What probably makes things worse is that most hospital admissions are not planned. If you're in the hospital, it probably wasn't on your calendar ahead of time (unless you were getting an elective surgery, but that's still a small minority of patients.)

Another problem comes from a collision of values, between trade and the value of human life. We see this every time trade - a dispassionate, utility-calculating way of thinking - collides with a highly limbic behavior, involving immediate pleasure or pain, family, tribal identity, or human life. You can see this best illustrated by the goods and services that are most likely across polities to be banned on moral grounds, or those which are socialized. Healthcare is one of those. (If this collision is still not clear: can I pay you $20 to hop on one foot for 1 minute? Sure, I would take that deal. Okay, now what's the price to sell your child? Disgusting and we shouldn't even be discussing it, right? There's the collision.) To begin with, even when they have time, people don't look up hospital quality ahead of time (let alone cost) as with other businesses - we spend more time on ratings sites for restaurants. For one thing, if your kid needs an operation, do you ask yourself "Is the extra $12,000 at the slightly more highly rated hospital across town really worth it?" If you do, you might feel guilty - anyone who has ever negotiated wedding or funeral costs has had a similar experience. But the other side of the coin is that healthcare providers are not trained as profit maximizers, but as life maximizers and pain minimizers. The ED physicians and nurses have no idea what's on that chargemaster, and they don't care. The system would be a lot worse if this were not the case - that is, if hospital physicians were compensated like car salesmen - because they could take much more horrible advantage of patients if they were incentivized. That said, there should be no surprise that healthcare costs go up, because the service providers are ignorant of the cost and there's no feedback loop.

Business Using Government to Stifle Competition

A smartphone app in New York that would let people find and hail cabs is being profoundly retarded by the city. No doubt such an app would be of great benefit to people hailing cabs and to individual cab drivers, but a disaster for cab companies (and dispatchers). Is there anything more to this story than cab companies protecting their interest at the expense of citizens, and the the city eagerly using regulation to do this for them?

The established businesses are very good at having to avoid defending their behavior; no matter what they say their motivation is, it's pretty obvious that they're acting exactly the same as they would be acting if they were just defending their interests at all costs. The state liquor control board in Pennsylvania has been doing much the same thing.

Regulation is often the friend of big business.

Urbanization in the U.S. and Canada

Australia is often used by demographers as an example of a highly urbanized country, but the contrast between Canada and the U.S. is perhaps more interesting, because we're on the same continent.  And indeed, looking at a biggest cities comparison list of both countries, it's striking: of the 3 biggest cities in North America, 2 are in Canada. But as you include more cities of decreasing size, the % of Canadian cities in the rank list converges toward 0.1.  (Y axis is cumulative % of Canadian cities in the list of biggest cities in North America, of cities with at least 100,000 inhabitants.)  Canada's smaller population is enriched for bigger cities.





Even better than the rank list is the difference in urbanization, i.e. the percent population in cities by size.  And there it's even more striking:  Canada's biggest city alone contains 16.2% of the country's population.  To get to that level of % urbanized population in the U.S. you have to add up the first 60 cities.Y axis is % of population in cities, counting cities of decreasing size up to that point (again, as far down as cities of population 100,000).





Climate?  Less of a homesteading policy in Canadian history?  Less aggressive property purchase incentives in the automobile era?  Or Canadian agriculture taking off only post-mechanization (and hence never requiring settlement by large numbers of people in the first place) since the climate is harsher?  The thing to do to start distinguishing between these alternatives would be to generate a 3D surface of this last plot with historical data to see if there are any obvious inflection points.  And with the last possibility, the question is whether the prairie provinces have areas losing population in the same way that the post-mechanization Midwest has in the U.S.  (More on agriculture and settlement of central North America here.)

The GOP's Push to Change the World at the State Level

There's been a recent, clear push by the GOP to aggressively focus on social conservative issues at the state level. Sam Brownback's call to do so in Kansas could not have been missed, and quickly we had a restrictive abortion law passed in North Dakota, an abortive tax plan in Louisiana (along with further rumbling about damage to science education), and an attempt to legislate Christianity in North Carolina. Focusing on change at the state level is a smart maneuver for the cast-out GOP, and it's not unprecedented in American political thought. The states (and smaller municipalities) are the laboratories of democracy we have to thank for things like gay marriage, marijuana decriminalization and euthanasia. If we wait for these political footballs to gain traction at the Federal level, they'll never get anywhere.

There are a few incongruities here, not least of which is that so far, the state-level social issues have been those dearest to progressives (and real libertarians); this focus of social cons on social issues is new. At least since 1861. A glance from the map of seceding states to the GOP-voting states in the 2012 election shows an uncanny resemblance, and American libertarians' discussions of "states' rights" are oddly bound up in this history - and serve as a dog whistle to both ends of the political spectrum. And it remains a total mystery to most people (including many libertarians) why it's acceptable for any non-state organization, or even for certain levels of government to take your rights, but not the Federal government. One piece in Reason several years ago, cited here, calls this "inverse state worship". That is: if the U.S. government picks a religion we all have to follow, that's oppression. But if your state does it - well, that's states' rights! Freedom!

Where many of the social experiments that states do have no impact either way on growth, some of those being pushed by social conservatives (particularly regarding science education) promise to have a negative one. Do we think that Brownback, Jindal et al will strengthen, or harm science education and research in their states? And that's one of the main problems with social conservatism - its goals, even when they're expressly declared, are rarely more than just a focus on justifying and extending itself. Ideally these states-as-laboratories experiments, across all parts of the political spectrum, should make measurable predictions about what impact they expect to have in the real world. But as with pundits, politicians aren't in the business of accountability, at least when they can avoid it (which is when we let them). Even if Brownback et al believe that they're doing something more than just manipulating how demographic inputs are read, there will be no feedback loop for their experiment, and in the minds of local electorates the further ruin of the heartland (the cycle of poor investment in education and technology, the crony capitalism instead of real growth, and the focus on social issues that don't matter) will again be seen as the central government's fault - and Kansas can move closer to being America's own Kazakhstan. Fortunately California and New York are here to support them with state-to-state welfare.

Human Capital-Intensive Fields That Sort Talent Poorly

Since human capital (Adam Smith's labor component) is becoming more and more important as economies develop, sorting talent has followed suit. It becomes a concern of economists to ask if the people with the potential to become the best doctors and pilots and software engineers are in fact becoming those things, or if there are barriers (passive and active) preventing this. No doubt we are nowhere near 100% in any field; education is still uneven, there are still active barriers like gender- and ethnicity-based discrimination in most parts of the world; and there are passive barriers, like crude talent-detection tools.

I'm just finishing my third year in medical school, and I've noticed something interesting about how people choose specialties (or how specialties choose them). A very brief description of how medical education works in the U.S. is in order: first, you go to college and get an undergraduate degree in something, usually some science. Then you apply to medical school, which lasts four years. During this time you get a general medical education with experience across most fields and specialties, regardless of whether you're pretty sure you know what you want to go into. (The surgeons have to do psychiatry and vice versa.) Then when you graduate medical school after those four years, you are a physician, but you haven't been trained in any one area. Toward the end of those four years of medical school, you choose - do you want to go into family practice, neurology, emergency medicine, etc. and you apply for a residency, where for 3-7 more years you are trained in that area. At the end of that, you are finally a family physician, or psychiatrist, or surgeon, or whatever.

Whether and where you get into medical school is based on your GPA as an undergrad and your MCAT, which is a general science and writing test. And it's my impression that this process does its job fairly well: medical students seem highly motivated, highly generally intelligent people capable of doing well in medicine. But what I find disillusioning is that there is not a really strong talent detection tool to select for aptitude at the next step, when people are choosing their specialties. So how is it determined what specialty you go into? For the most part, you choose what you liked the most during your third year of medical school, and except for the most competitive specialties, most American medical graduates will get into a program in their chosen field, somewhere in the country. What differs is how competitive of a program you get into, which does affect where you go from there. And the inputs there are the disillusioning ones. It's basically, in this order: First, how well you score on the first part of your boards and how competitive is the area you're going into. Second: did the people you worked under in that specialty during medical school like you? (Yes, it's pretty much that subjective; there are grades but they only vaguely reflect effort and competence.) A distant third: did you not screw up the specific test they gave you at the end of the relevant rotation in medical school? Notice how little effort there is to really discriminate the specific talent of the person in that particular specialty among their peers, and how under-emphasized it is in the grand scheme.

I'll address #2 first. Microsoft commissioned a study where they determined how long it took people to form their impressions of a professional's competence, and found that they often do it before the professional opens his or her mouth, based (apparently) entirely on how much the person matches preconceptions of the appearance and behavior of a someone in that profession. So imagine my chagrin when I overhear, repeatedly, students being told by their superiors that they (the superiors) thought the student was going into specialty X, because "you just look like an X". (Seriously.) No doubt personality match and culture in each specialty make a huge difference to how engaged and effective someone will be during their careers, but this seems to be missing something important. Older students are often valued in psychiatry, and fortunately my "life experience" will benefit me in the specialty that most appeals to me. But if I had innate talent as a surgeon and chose that path, I would have had a hard road, because a guy my age with a fully formed ego not bound up in medical status hierarchy doesn't fit the idea of a young nose-to-the-grindstone surgeon in training. I don't look like a surgeon, regardless how much I would've wanted to be one. (Fortunately for all involved I was never in any danger of becoming a surgeon.)

As for #1: certain specialties are much harder to get into than others (ortho surgery and dermatology are extremely competitive for example). So in a way, your board scores do determine which specialties you can go into, but only by how good they are. (It's not like programs really break the score down by subsection, they just look at the main number.) So if you do really well, you have a shot at anything you want. If not, well, you're not going to be a dermatologist. And here's the interesting thing: 20 years ago, you almost couldn't pay people to apply to derm residencies. But then the reimbursement structure of medicine changed quickly, plus medical students gradually got wise to this and realized that in derm, here's a specialty that had excellent hours and great pay, and to hell with the status hierarchy. What this means is that (no offense to the great dermatologists I've worked with) based on their scores, your average dermatology resident today is more competitive globally than a derm resident 20 years ago. Is this appropriate? That is, have there been so many advances in dermatology in 20 years that derm residents have had to get smarter to keep up, or is it something completely separate from the field itself - and therefore, the talent of the people going into it? This is all to say that stratifying applicants based on their general board score is not finding the best dermatologist or OBGYN. It's sorting people based on the general aptitude, and then there will be a tendency for the top scorers to go into whatever is perceived as high-status and/or well-reimbursed at the moment.

Two asides. First, letting people choose what they like is probably the best part of the whole process, although this doesn't tell you how many people are choosing on status and money in the specialty rather than talent. Also, obviously there are many medical skills you can't evaluate with a traditional test, so to really find out who the surgeons are (for example) vs. the medicine docs or the neurologists, we would need simulations. Yes, this is difficult and imposes more time and expense on the medical education process, but I think it's worth it so that institutions (and medical students) know that the best-suited people really are going into each specialty, and anyway we already do have a patient simulation test for step 2 of our board certification.

My point: of course the reality is these sorts of inefficient sorting mechanisms exist many places in life. But in human-capital-intensive fields like medicine with socially valuable outputs, you would hope that the search mechanisms would be more robust. I suspect this is partly an artifact of antiquated medical education conventions, and my hope is that it will improve.

Why Do Sub-Cultures Dislike Luke-Warm Adherents

It's a sad time for sub-cultures in the developed world. Why? Many subcultures, particularly those with mostly young folks (and who else will go out of their way to spend money and effort and incur opportunity cost to signal their identity this way?) have traditionally relied on either seeming a little threatening, or being obscure. The internet has made that very difficult, and those kinds of subcultures have failed to remain coherent, because they have more difficulty preserving an us-and-them divide.

But people do genuinely differ in their talents and tastes and shared experiences, so SOME subcultures remain. And one that fascinates me is Burning Man, which I've written about before. I went to Burning Man once, in 2000. It was fun and a really interesting experience, but I don't see the reason to do it again; and partly too, the art legitimately impressed me, and I don't want to go back without contributing, and even if I had the talent I don't have the time to make something. But here's the interesting part. From self-described Burners who I meet casually (i.e., people who are not already friends), I've gotten some pretty thinly-veiled hostility at my casual attitude. The only way I can make sense of this is that here's something that forms a big part of their identity, and partly what they like is the specialness of it - not everyone is a Burner after all - and here I come in effect saying, it was fun, but I was able to partake, not be fundamentally changed by it, and not return, out of insufficient excitement, rather than outright rejection. (As a patriotic San Francisco adoptee, I have a little bit of the same reaction when someone visits San Francisco from elsewhere in the country and is unimpressed.)

This observation can likely be applied much more generally, but what makes me post about these occasional conversations with annoyed Burners is that part of what does seem so great about something like Burning Man is exactly the voluntariness of it; you want to go, great. You don't want to go, great. But that's not the way this attitude makes me feel and I imagine I'm not alone in that. It would be one thing if people shrugged and said, "Ih, it's not your cup of tea" but in several cases the comments have been more judgmental. Once you go, you apparently have to profess your love indefinitely. So much for voluntariness!

It could also be that there's a certain status associated with being a Burner, and when you're in contact with someone but don't play their status game, there are two ways to go: ignorance and conscious rejection. Ignorance is the clueless foreigner who has different status-determination rules. A proud Mercedes owner doesn't mind that said foreigner is not impressed with his Mercedes, because the foreigner doesn't "know any better", and therefore doesn't count. Much worse is the smartass that says "A Mercedes really isn't that great" or even worse, "I don't care what kind of car you drive." That boils down to, "Yes, I recognize that you value your car (or Burning Man experiences and friendships) highly, but to your face I'm telling you that not only am I not impressed, but I think you have poor values and have made a bad choice about how to measure yourself."

New Call to Regulate Drones: from Google Head Eric Schmidt

This is cross-posted at my technology blog, Speculative Nonfiction.

Article here. There's a clear motivation for governments and the enforcer class to have a monopoly on this technology, and Frank Fukuyama among others had predicted some time ago that governments would start creating this monopoly shortly (is this why Chris Squire put down his capital investment of a drone manufacturing facility across the border in Mexico?), but why from the private sector? I'm not sure what Schmidt is doing here. Is he just going on record stating his discomfort with drones so Google can distance itself from perceived vague connections to sure-to-come abuses of technology?

In any event, if you're uncomfortable with your neighbor having a drone, I'm ten times as nervous when the police are allowed to have drones but the rest of us are not.