jamesz

Do we get what we pay for in healthcare?

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I said earlier that we might not always want to trust the people with the best track record when we go off the beaten path. Sometimes the tools that work in one environment aren’t the best to use when the environment changes and what we really need are experts in developing tools.

A related post on OB points to another reason why trusting track records isn’t always best.

Call it the best-kept secret in Massachusetts medicine: Health and life insurance companies pay a handful of hospitals far more for the same work even when there is no evidence that the higher-priced care produces healthier patients.

We might naively use this as evidence that less prestigious hospitals actually offer better care. However, another possible interpretation is that the toughest cases go to the most prestigious hospitals where there are more hospital beds available and, despite the higher standard of care, they end up with a higher mortality rate. Read more

Matt Nolan

February RBA: Rates unchanged

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The Reserve Bank of Australia has left their rates unchanged at 3.25% (statement here). We suggested that this was a possibility earlier in the day – and it is the closest thing to a correct rate call that I’ve have made for the last 18 months 😛

Relatively robust domestic demand, combined with commodity prices that just won’t fall sharply, has convinced the RBA that there is now enough stimulus.

They haven’t given up on future rate cuts. “The Board will consider the position again at its next meeting” indicates to me that there is room for cuts if Australian output starts to decline or if commodity prices from their end are really starting to sag.

This will definitely dent expected rate cuts in New Zealand. Before this I would have bagged a 75 cut – now a 50 cut is looking a lot more likely (than it was). I’ll keep an eye on iPredicit to see what is going to happen.

jamesz

Should we trust the forecasters?

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I’ve been flicking back over some posts by Robin Hanson at Overcoming Bias and came across this one about judging the reliability of macroeconomists’ advice:

It turns out that many macro economists frequently forecast future macro events. Furthermore, many places keep standardized track records of such forecasts, records that can be compared for accuracy; we can compare the accuracy of such folks!
. . .
Alas, it turns out that there is almost no overlap between the macro-economists who are considered the most prestigious and those who even publish forecasts.

I can understand wanting to rely on the economist with the best track record for ordinary forecasting, but is there a difference in the current climate? Read more

Matt Nolan

February Australian commodity prices

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In all this negative news there is one plus that keeps on going:  Australian commodity prices:

aucommodSource(RBA)

In Australian dollar terms export prices are virtually unchanged.  I prefer looking at world prices though, as it gives you some idea of relative prices without having to look at the terms of trade (a sketchy idea).  In this sense prices are down 12% on their September 2008 peak.  However, to put this in perspective, this is 20% higher than February 2008!

I am very surprised with how strongly Australian commodity prices have held up.  Late last year people told me it was because the RBA measure was a “lagging indicator.  However, its February now and the index still looks very strong – why?  With this sort of information I can understand why the RBA might not cut rates today.

Matt Nolan

Vacuous economic explanations: Example 1

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From a report on NZIER’s latest forecasts:

The main factors reducing economic activity were falls in private consumption, investment and net exports, NZIER said.

I am going to assume that NZIER didn’t actually say that – and that it instead came straight from NZPA.

When everything is falling (except government spending it seems), saying that activity fell because activity fell is relatively meaningless.  Why not say that the decline in economic activity was broad based, and was the result of some REAL FACTORS, like a drought or high oil prices or a collapsing world economy.

I don’t really see C+I+G+X-M as an explanation – it is an identity that allows us to frame issues, but if we are going to talk about “factors” behind a recession we should actually talk about the things that lowered activity.  Bryan Caplan doesn’t like it either – so I’m not alone in this distaste 🙂

Matt Nolan

The cost of cannabis captures

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A recent article on Stuff pointed out that there has been a number of police raids of cannabis plantations over the past few months. The justification for this is that cannabis is an illegal drug – and it has been made illegal because people believe that this is socially optimal. Same time people trust CBD oil, right – here at https://cbdforsure.com/ is all information about it and it’s legal! (Image source SMBC). Apart from it, marijuana dispensary near me provides weed maps, which  show where to buy cannabis.

However, when I read the story this isn’t what went through my head. My first thought was crap – that will definitely drive up the demand for other drugs!

How does this work? Well cannabis is one in a array of drugs (including alcohol) which could be used for recreation – as a result these drugs are substitutes. If we increase the price of cannabis, then we increase the demand for other drugs. As these raids are destroying supplies, this will increase the price of cannabis – having that exact effect.

This concerns me, as I’m more concerned about individuals consuming and becoming addicted to higher level drugs (such as P) than I am about people getting stoned. As a result, I can easily conceive of a situation where these raids are not in the social interest.

Note:  The purpose of the image is to create a counter-argument you can use to argue with me – and also because I find it funny in its sarcasm 🙂