Two Americans Win Nobel Prize in Economics

Posted on by Christine Harbin

This morning, two U.S. economists, Elinor Ostrom and Oliver Williamson, were awarded the Nobel Prize in economics. Both study economic governance and individual decision-making. Additionally, Ostrom is the first woman to win the prize for economics.

In an editorial in Forbes, John V.C. Nye, professor of economics at George Mason University, explains how Ostrom and Williamson have contributed to the subject:

Both can be seen as pioneers in understanding how markets work in the real world where transactions costs are high, establishing smoothly functioning markets is costly, information is incomplete, and hiring and production options are limited. They show how firms, communities and organizations come to solve these problems absent government regulation and how the choices they make can be disrupted or worsened by bad state policy or sustained by good rules that promote stable property rights and reliable contracts.

Ostrom’s and Williamson’s works relate to the Show-Me Institute’s tenets of limited government, property rights, and informed state policy. Congratulations to them both.

What Will Future Health Care Look Like?

Posted on by Christine Harbin

Today, Rik Hafer, chair of the Department of Economics and Finance at Southern Illinois University–Edwardsville and research fellow with the Show Me Institute, and Susan Feigenbaum, an economics professor at the University of Missouri–Saint Louis, published an op-ed in the St. Louis Business Journal, “Will future health care look like Canada’s or Britain’s?”

Will our future health care look more like Canada’s or Britain’s system? The answer depends on whether the system adopted simply expands the Medicare approach. […]

Hafer and Feigenbaum explain that, although each country has a health system that is government-run, many differences exist between them. For example, the Canadians and Britons have responded differently to problems relating to patient access and financing. Whereas Canada has discouraged the expansion of private medical insurance, Britain has encouraged it.

For more information about the negative consequences of government involvement in health care, check out the Show-Me Institute’s study by Arduin, Laffer & Moore Econometrics, “The Prognosis for National Health Insurance: A Missouri Perspective.”

Another Proposal Turned Down in Oregon’s Anti-Charter Environment

Posted on by Sarah Brodsky

Last night, a school board in Oregon turned down a charter school application because the proposed charter would compete with the district:

Board members said the 6-12th grade school, sponsored by Corbett School District superintendent Bob Dunton, was an innovative program but would compete with course offerings at the high school and represented a budget risk for the financially-strapped school district. […]

Though no board members specifically cited one of the state mandated reasons for denying a charter applications, after the meeting board members said the school represented an “identifiable adverse impact” on the school district because the district might lose students to the charter and therefore a portion of state funding.

When school boards can stop charters simply because they want to keep their monopoly, no charter is safe.

Breakfast Accountability

Posted on by Sarah Brodsky

The Philadelphia Inquirer reports that the School District of Philadelphia is going to start evaluating principals by, among other things, how many students eat breakfast at school.

I liked these comments from a principal:

Should a principal be blamed for a student who ate breakfast at home and therefore doesn’t eat in school?, asked Lerner, who was a principal for 22 years.

“Are we going to get to forced feedings?” he continued. “I think it’s wrong to assume no parent in Philadelphia is providing breakfast each day.”

I can see how providing breakfast could boost achievement if some students don’t have enough to eat at home. A breakfast program with such a goal has already succeeded if it makes food available. We can assume that students who don’t take advantage just aren’t hungry. (All students in Philadelphia are eligible for free breakfast, even students from high-income households.)

This is an example of a district focusing on minor details that have no link to classroom instruction, and missing the big picture. We’ve seen that happen in St. Louis, too.

How Does Missouri Health Care Compare?

Posted on by Stephen Feman

A recent news article compared cost and quality of health care across all the states of our country. We are in the middle of the United States, so it was good to find that our state was near the middle of Medicare spending per beneficiary, and close to the midpoint in terms of the “overall quality of health care.” Of the states that border Missouri, only Iowa was listed as having better quality, and more than half of the other bordering states were found to have both poorer quality and to be more expensive.

That is good to know, but that data was just for the Medicare population, a group that is mostly made up of people over age 65. What about the rest of us? To look at this, it is best to use information about life expectancy. In the medical community the phrase “life expectancy” describes the number of years a person would be expected to live if the current health care system remained as it is now, without any changes for the duration of that person’s life. In 2000, the U.S. Census Bureau said that life expectancy in Missouri was 76.2 years, and since that time it has improved to 76.8. Well, that is pretty good, and it is even better for you and me that it is getting longer. However, in 2009, the average life expectancy for the entire United States was reported to be 78.11. At that same time, in most of the industrialized nations of the world, life expectancy was reported to be 79.0. I guess that means that in Missouri, life expectancy is not as good as in most of the nation’s other states, and life expectancy is poorer than in of most of the industrialized nations of the world.

Why should that be? Could it be something simple, like there being not enough doctors for the number of people who are in need of medical care? That may be. (See my recent report on rural health care in Missouri.) The OECD tells us that in most of the industrialized nations of the world (that is, in the countries where people live longer than we do in Missouri), there are 2.9 practicing physicians per 1,000 people, while in the overall United States, there are only 2.34, and in Missouri there are only 2.24.

Nevertheless, the fact remains that we are spending more for health care than anybody else. Everyone knows that in the United States, we spend more than 16 percent of our Gross Domestic Product for health care, or $7,290 per person, while in Missouri it is $7,709 per person.

So, there you have it. As everyone knows, we are spending more and getting less. This needs to be changed. It may seem simplistic, but wouldn’t we be better off if there were more physicians? That would certainly reduce one complaint about there not being enough physicians to supply the current needs in this country. But, beyond that, wouldn’t an increase in physicians produce more competition among health care suppliers, and a corresponding reduction in fees?

Local Food in Springfield

Posted on by Sarah Brodsky

The Springfield News-Leader has a story today about urban gardening. Here’s how a member of a task force explains the rationale for local food subsidies:

“The food consumed by the citizens of the Springfield Economic Area, an amount in excess of 1,100 tons of food per day, is shipped and trucked to us along a fragile and globalized supply line,” Chadwick wrote in a letter to the City Council.

“All depends upon the continued availability of cheap foreign oil. Should this delivery system be disrupted for any reason, supermarket shelves will empty within hours.”

I wouldn’t call the global economy fragile — certainly not when compared with local food production in a single city. In the global economy, there are multiple sources of energy and competing transportation providers, so if one is overburdened, others can step in. Food comes to the United States from all over the world; we’re not putting all our eggs in one basket. If a crop fails in one country, we get food from somewhere else. Produce that’s not in season in the United States can be imported from a warmer climate. The diversity of food sources around the globe makes a food shortage like the one postulated in the quote highly unlikely.

On the other hand, food production in one city is vulnerable and dependent on local crop conditions. Nor is it protected from what goes on in the rest of the world. If something so catastrophic happens that global transportation comes to a halt, there’s no reason to think that life in Springfield would continue as before, with everyone contentedly growing local crops. I say this not to scare people in Springfield, as I don’t expect any such thing to happen, but to make the point that a small economy is no better able to withstand disaster than a large economy. If anything, it’s more susceptible to the caprice of nature.

Although it’s poor insurance against global economic collapse, there are plenty of good reasons to grow and sell local food. Many people enjoy gardening or like to buy produce from their neighbors. It’s unfortunate that they face regulations and other barriers to entry in Springfield. You can’t sell produce from your personal or community garden in Springfield–and farmers’ markets, where sales are allowed, must take place in commercial districts and with special permits from the city.

Springfield ought to take a break from convening task forces and anticipating disasters, and instead make its local food regulations less restrictive. It won’t mean the end of the world, or of the global economy, if a few farmers sell food in the wrong zone.

Ethanol on My Mind

Posted on by David Stokes

I have been thinking about ethanol lately because the hotel with which our office building shares a parking garage seems to be hosting some type of conference that has brought down some people from Iowa. Our garage contains several cars marked as belonging to “Iowa State” or “Iowa Department of Transportation,” and they all sport large bumper stickers proclaiming that they run on ethanol fuel. Good for them. I am glad they are visiting Missouri, where they get ethanol in their gas whether they like it or not. (I am pretty sure they like it.)

This is topical because just the other day the Government Accountability Office released a report recommending that we do away with the ethanol tax credit. The Post-Dispatch‘s “Political Fix” has the story here. Now, the bad part is that the tax credit is no longer needed because another government mandate is forcing ethanol on us:

But the GAO said the tax break is no longer needed now that the industry has prospered under a government mandate for ethanol use, called the Renewable Fuel Standard.

So, the ethanol industry “prospers” because of a federal mandate, a federal subsidy, and an additional state mandate. But I guess getting rid of one of them amounts to some progress, at least.

Here is some of the work we have done at the Show-Me Institute about ethanol.

Starting a Charter School in Wyoming

Posted on by Sarah Brodsky

Lest anyone think I’m trying to pick on Oregon when I write about its nonsensical charter school application process, let me point out that Oregon is not the only state whose charter school regulations should be updated. An article linked to by Edspresso explains the drawbacks of Wyoming’s policy.

The current system in Wyoming is a headache for any district superintendent, who must first help charter sponsors create an application, then turn around and make a recommendation about the charter to the school board. These are the superintendent and board of the same district that’s going to be competing with whatever new charters are approved.

The Wyoming Department of Education is considering changes to the process. The new rules would direct sponsors to work more closely with the Department when writing proposals; superintendents would continue to report on the application to the school boards.

These changes could be a step toward simplifying things, but I hope Wyoming will institute broader reforms in the future. Traditional districts and charters compete for a limited number of students. The state shouldn’t ask them to work together or depend on each other for approval, because their interests are at odds with one another.

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