The Argument Over EpiPens

Now that the cost of EpiPens (auto-injectors for epinephrine) has become a national campaign issue, it might be worth thinking about why they’re so darned expensive—as much as $600 a pop, having risen from $94 for a two-pack over just nine years. Timothy Holbrook considers the question at RealClearHealth and comes up with a couple of explanations: patents and lack of competition, in turn a product of regulatory barriers to entry.

Much of Mr. Holbrook’s piece is a paean to the patent system as the engine of innovation. I think that’s a subject worthy of dispassionate investigation on its own and I’m skeptical that the matter is as cut and dried as Mr. Holbrook suggests. The research budgets of today’s major pharmaceutical companies do not rise with revenues but with inflation. IMO Big Pharma (as these large pharmaceutical companies are called) are best thought of as rent-seeking organizations with small research branches.

Do we really need patents any more? Or would society as a whole be better off with reduced barriers to entry via regulation that is less friendly to the large producers and more friendly to the small?

IMO the reason that the cost of EpiPens is so high is that it’s what the market will bear and until recently consumers didn’t see the rising costs. That changed as deductibles rose and now consumers are starting to complain.

Unfortunately, they’re complaining about the high cost of EpiPens rather than rising deductibles.

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Why We Need At Least Two Immigration Policies

In an insightful post at the Washington Post Dan Drezner summarizes the U. S. immigration situation like this:

At this time, we know that:

  1. The United States is experiencing a net outflow of Mexican migrants.
  2. The number of individuals living illegally in the United States has declined (contra Krikorian, Pew estimates the number as falling from 12.1 million in 2007 to 11.3 million in 2o14).
  3. The notion that unvetted refugees are flooding into the United States is a complete lie.

This doesn’t mean that illegal immigration flows might not tick up again, particularly if the U.S. economy outpaces the rest of the world in job creation. But it suggests that, right now, the undocumented residents are in fact the biggest part of the problem.

He characterizes that as the “core dilemma” of U. S. immigration policy. While I think that illegal immigrants (most aren’t merely undocumented—that’s a euphemism) form one aspect of our core dilemma, I don’t think that’s really it. Here in summary are my views on immigration:

  1. An ongoing, reliable supply of low wage immigrants hurts poor native-born Americans, particularly African Americans, with much of the benefit going to the highest income earners.
  2. An ongoing, reliable supply of skilled immigrants hurts middle income native-born Americans by depressing wages, with much of the benefit going to the highest income earners.
  3. Many of the skilled immigrants are brought in fraudulently.
  4. A large number of immigrants creates problems for the states. Anyone who has seen a classroom in which no two children speak the same language at home understands this.
  5. A large immigrant population exacerbates income inequality, practically by definition.

Now consider the graphic at the top of this post, gleaned from the Census Bureau’s presentation on immigration using Community Survey data. The United States is the only country in the world that shares a 1,500 mile land border with a country that has a median income 20% of its own. That creates incentives for illegal border crossing different from anywhere else. That this illegal migrant workers will work for lower wages and under conditions native-born workers would protest are incentives for less than scrupulous employers to hire them, indeed, hire them preferentially, something that will continue regardless of any border control we might put in place.

That Mexico along with other Central American countries, many of whose people pass through Mexico on their way to the U. S., figures so prominently, should not come as a shock. A large Mexican population in the United States poses other challenges. I suspect that if Ireland were joined to the U. S. by a land border and the Irish claimed the United States by virtue of St. Columba’s having discovered America in a coracle there would have been even more pushback against the Irish coming here than there was.

Note, too, that people from the third largest source country by number of immigrants, India (1.8 million), also pose special problems. Nearly three-quarters of Indian immigrants to the United States speak a language other than English at home. There are more than 1,500 languages spoken in India. I don’t really know what that means. Cultural preference? Resistance to assimilation? They view themselves as guest workers rather than permanent immigrants?

Consequently, I would say that the core dilemma of U. S. immigration policy is that we need more than one immigration policy, at least two—one that pertains almost entirely to Mexico and another for all other migrants. We may actually need more policies.

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What Do You Do With an Enemy That Can’t Be Deterred?

Last week the United States government changed North Korea’s status from potential threat to practical threat. CNN reports:

Washington (CNN)The US government is increasingly concerned that advances in North Korea’s weapons program have dramatically decreased the warning time for a nuclear attack on America or its allies, according to US officials.

The regime’s aggressive testing of medium- and long-range missiles — as well as its nuclear testing — makes North Korea now a “practical” threat and no longer a “theoretical” threat, in the words of one US official familiar with the latest US intelligence thinking.

Significantly, North Korea no longer cares if the world sees its test failures, according to the latest analyses, allowing Pyongyang to more openly, aggressively and repeatedly test all of the key components needed for an attack.

As a result, the regime has the ability to hold the US and allies “at risk” with nuclear weapons, the US official said.

On Wednesday North Korea conducted another missile test, this time launching a ballistic missile from a submarine into the waters between North Korea and Japan. From Reuters:

North Korea fired a submarine-launched missile on Wednesday that flew about 500 km (311 miles) towards Japan, a show of improving technological capability for the isolated country that has conducted a series of launches in defiance of UN sanctions.

Having the ability to fire a missile from a submarine could help North Korea evade a new anti-missile system planned for South Korea and pose a threat even if nuclear-armed North Korea’s land-based arsenal was destroyed, experts said.

The ballistic missile was fired at around 5:30 a.m. (2030 GMT) from near the coastal city of Sinpo, where a submarine base is located, officials at South Korea’s Joint Chiefs of Staff and the Defence Ministry told Reuters.

The projectile reached Japan’s air defence identification zone (ADIZ) for the first time, Chief Cabinet Secretary Yoshihide Suga told a briefing, referring to an area of control designated by countries to help maintain air security.

The missile was fired at a high angle, South Korea’s Yonhap News Agency reported, an indication that its full range would be 1,000 km (620 miles) at an ordinary trajectory. The distance indicated the North’s push to develop a submarine-launched missile system was paying off, officials and experts said.

There was, apparently, no report of the class of the particular missile that was tested. It was presumably a KN-11 (also known as a Polaris-1, Bukgeukseong-1, or Nodong-D), the first completely successful test of the technology. Since North Korea is not known to possess nuclear submarines or diesel-electric submarines capable of reaching Hawaii or the Western U. S. seaboard, the capability does not pose a direct threat to the U. S. but it does pose a threat to the South Koreans and the Japanese.

I’m actually a bit surprised that the U. S. still hasn’t done what I suggested some time ago: use these missile tests as handy opportunities for testing missile defenses. My best guess is that we don’t want to aggravate the Chinese.

How do you deal with an enemy like North Korea that manifestly cannot be trusted, that cannot be deterred, and that is not a “rational actor”, at least not as we view reasonableness? North Korea’s only real patron is China and China appears to be willing to put up with any provocation from North Korea as long as the country doesn’t collapse entirely. China itself has been acting in a more provocative manner in the region.

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Point/Counterpoint on the the PPACA

You might be interested in the Washington Post’s latest point/counterpoint on the Affordable Care Act. Is it entering a “death spiral” or not?

Taking on the defense of the PPACA are Ezekiel Emanuel (Rahm’s brother) and Topher Spiro. Their defense is the conventional one—it’s just growing pains:

So why are insurers substantially increasing premiums or withdrawing from markets? They are making a one-time correction to bring premiums in line with costs. Setting a price is difficult when entering new markets — when the ACA was implemented in 2014, many insurers did not initially price their products accurately, and some may have even underpriced their plans deliberately in an attempt to establish market share.

conjoined with a circular argument—the PPACA won’t collapse as long as more money is put into subsidies by the federal government:

Second, policymakers can take action to further improve the risk pool — for instance, by making student loan payments deductible from younger enrollees’ incomes to boost their tax credits.

The subsidy they’re proposing must come from somewhere. The only available candidate is Uncle Sugar.

This was the statement from their op-ed that caught my eye:

Finally, keeping health-care costs under control is the best way to minimize premium increases. The rising cost of prescription drugs is one major component of growth in medical costs, and the insurance industry must get off the fence and back meaningful solutions, such as value-based pricing.

According to the Kaiser Family Foundation here’s how healthcare dollars are spent:

It might well be true that spending on pharmaceuticals is increasing rapidly. From that you might reasonably conclude that an increasing proportion of healthcare spending is devoted to pharmaceuticals but that doesn’t appear to be the case. Over the period of the last 35 years spending on pharmaceuticals as a proportion of all spending has varied within a fairly narrow range, from 8% to 12%.

What does appear to be the case is that pharmaceuticals are a large proportion of out-of-pocket spending on the part of the elderly. I suspect that Dr. Emanuel is engaging in a political calculation rather than a policy analysis.

In contrast Avik Roy makes the opposite case:

All but the most hardened partisans understand that the Affordable Care Act’s insurance exchanges are in serious trouble. In 2010, the Congressional Budget Office predicted that 21 million people would have exchange-based coverage in 2016; the real number was about 12 million. As insurers head for the exits, the gap between initial hype and final reality will widen.

The tragedy is that this was entirely avoidable. The ACA’s exchanges were fundamentally flawed in their design, something that private-sector experts tried to point out at the time. In October 2009, PricewaterhouseCoopers published a report projecting that by 2016, the ACA would cumulatively increase individual-market health insurance premiums by 47 percent. (PwC’s estimate was conservative. In fact, premiums increased by 49 percent in 2014 alone and by 77 percent through 2016.)

My assessment is that the PPACA wasn’t designed to succeed. It was designed get through the Senate. That means that it satisfied the shibboleths that had surrounded the consensus that had arisen in the leadership of the Democratic Party.

Now it’s become a sacred cow that will be very difficult to amend even when amending it makes sense.

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Why Not Protect Everybody?

Barry Ritholtz’s most recent post at Bloomberg is dominated by the graphic above. It is notionally about inflation over the last 20 years but, unfortunately, he confuses price increases with inflation. They aren’t the same. He looks “a little more deeply at each category” but it can be summarized pretty easily. Sectors that have been protected and/or subsidized have risen in price; sectors that haven’t have fallen, largely because their production has moved overseas.

The conclusion is simultaneously painful and easy: protect everyone or protect no one. The idea that our comparative advantage as a country will be as consumers is fatuous.

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Can Pump-Priming Make Up for Bad Decisions?

At Telegraph Ambrose Evans-Pritchard suggests that China has entered a “liquidity trap”:

China is at mounting risk of a Japanese-style “liquidity trap” as monetary policy loses traction and the economy approaches credit exhaustion, forcing a shift towards Keynesian fiscal stimulus.

Officials at the Chinese People’s Bank (PBOC) have begun to call for a fundamental change in strategy, warning that interest rate cuts have become an increasingly blunt tool.

They cannot easily stop companies hoarding cash or halt the slide in private investment.

Sheng Songcheng, the PBOC’s head of analysis, set off a storm last month by warning that the economy had “started to show some signs of being caught in a liquidity trap”.

He has since stepped up his pleas for action by the fiscal authorities to relieve the burden on the central bank, a Chinese variant of the parallel drama that is being played out in Europe and Japan.

Frankly, I doubt that conventional Keynesian pump-priming will do much more than build more empty cities or factories that make products with no one to buy them and that highlights China’s basic problem. China has tremendously more productive capacity not only than it needs but than the world needs, the result of massive government subsidization over decades. Bad decisions made over the period of thirty years have resulted in an enormous amount of deadweight loss. China’s problems are likely to persist unless and until they can start dealing with that deadweight loss.

If the authorities want to spur China’s economy, they should start giving money to the Chinese people rather than to the still mostly state-owned Chinese businesses. There’s a reason they haven’t done that. They can’t control the outcome.

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Let France Be France

The brouhaha over a number of French towns’ banning the “burqini”, a whole body-covering women’s swimwear somewhat resembling a wetsuit, has caught the attention of news media in the United Kingdom, the United States, and Germany.

Der Spiegel:

Banning the burqa is irrelevant to the fight Islamist fundamentalism and to the battle for the liberation of Muslim women. It would merely save us from having to look at them. What we should instead be doing is extending a helping hand to those who are suppressed in the form of language courses, neighborhood meetings or invitations for a coffee. We should be confident that our way of life is attractive enough that it encourages imitative forms of emancipation.

Asma T. Uddin in the New York Times:

Washington — Fifteen towns in France have issued bans on the full-body swimsuit worn by some Muslim women and nicknamed the “burkini,” citing public order and security concerns. According to the ordinance in Cannes, “Beach attire that ostentatiously displays a religious affiliation, while France and places of worship are the target of terrorist acts, is likely to create risks to public order.”

How do pants, a long-sleeve shirt and a head covering made of swimsuit material threaten public safety?

According to France’s prime minister, Manuel Valls, the suit is part of “the enslavement of women.” In a newspaper interview, the mayor of Cannes, David Lisnard, said: “The burkini is the uniform of extremist Islamism, not of the Muslim religion.”

Ben Quinn in the Guardian:

The Nice tribunal ruled on Monday that the ban in Villeneuve-Loubet was “necessary, appropriate and proportionate” to prevent public disorder after a succession of jihadi attacks in France.

The burkini was “liable to offend the religious convictions or (religious) non-convictions of other users of the beach,” and “be felt as a defiance or a provocation exacerbating tensions felt by” the community, it added.

The ruling by the state council, France’s highest administrative court, will provide a legal precedent for towns to follow around the country.

Over the period of the last two centuries the foundations of the modern French state have rested on a single French language, a single French culture, and secularism, laïcité. Rejecting the French language, conventional French dress, and French mores isn’t just a statement of preference. It’s a political statement and one that, from the point of view of many of the French, challenges the very basis of modern France.

Like it or not it is up to the French to decide what it means to be French. If you don’t like it, go elsewhere. Let France be France.

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The Whales of August

As I write this, my wife is watching The Whales of August, on demand. If you’ve never seen it it’s a very good movie, a drama about two elderly sisters and their elderly friends and their interactions as they spend time together in the sisters’ summer home in Maine.

Even if it were not a good movie it would be an important movie, an artifact, since it stars Lillian Gish (in her last movie role), Bette Davis, and Ann Sothern. When it was made the three veteran actresses had nearly 200 years of movie-making experience all together. We will never see their or its like again.

There’s a famous anecdote about the making of the movie. After shooting a scene the director, Lindsay Anderson, said to Lillian Gish, “Miss Gish, you’ve just given me a perfect close-up.” To which Bette Davis responded, “Of course she did. She invented them.”

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Why Does It Resonate?

Since Rodrigo Duterte took office as the president of the Philippines at the end of June, 1,900 people have been killed, mostly by police, in the crackdown on drug dealing he ran on. The BBC reports:

The head of the Philippines police has said more than 1,900 people have been killed during a crackdown on illegal drugs in the past seven weeks.

Ronald dela Rosa was speaking at a senate hearing into the sharp rise in deaths since Rodrigo Duterte became president.

He said police operations had killed about 750 people, but the other deaths were still being investigated.

Mr Duterte won the presidency with his hard-line policy to eradicate drugs.

He has previously urged citizens to shoot and kill drug dealers who resisted arrest, and reiterated that the killings of drug suspects were lawful if the police acted in self-defence.

He also threatened to “separate” from the UN after it called his war on drugs a crime under international law.

Dubbed “The Punisher” by Time (after the Marvel Comics vigilante), President Duterte clearly won office as a consequence of rather than despite his hardline stance.

I’m not particularly well-informed about Filipino current events or politics. Why does this issue resonate with the people there?

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The Music Goes ‘Round and ‘Round


I’ve been avoiding remarking on the presidential campaigns as their Mighty Wurlitzers spin out. However, this comment by Chris Cillizza at the Washington Post on the latest revelation about Hillary Clinton’s emails caught my attention:

To be clear: Clinton has already been cleared of any official wrongdoing in the matter by Comey. And Comey and the FBI were aware of this latest batch of emails — hell, they found them! — when he rendered his judgment on Clinton.

Is that actually what happened? Maybe my opinions are clouding my judgments and my recollection. What I remember is that, after laying out a prima facie case that Sec. Clinton had actually broken the law he declined to request an indictment anyway, saying that the didn’t think he had a winnable case and presumably to take the pressure off his boss and her boss.

That didn’t clear Sec. Clinton of anything. A case could be brought later as new evidence emerges or old evidence that makes Director Comey’s and by extension the administration’s position untenable is revealed.

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