More on the Federal Reserve of Health

Obama's Health Plan -- a Preview;

One of the attractions of "Critical" is that it provides a more detailed blueprint of the Democratic approach to overhauling American health care than either Mr. Obama or Hillary Clinton has offered on the campaign trail. One of Mr. Daschle's co-authors, Jeanne Lambrew, handled the powerful health-care desk at the Office of Management and Budget for the Clinton administration and now works at the Center for American Progress, an influential Democratic think tank. Mr. Daschle is similarly fluent in his party's thinking on health-care policy.

The most important proposal in "Critical" is the creation of a "Federal Health Board," explicitly modeled on the Federal Reserve Board. Its duties would include "recommending coverage of those drugs and procedures backed by solid evidence. It would exert influence by ranking services and therapies by their health and cost impacts."

Mr. Daschle predicts that the board would change the entire health-care market by forcing expanded Medicare, Medicaid and veterans programs to follow its lead. Private health insurers would follow along, too, in part for the political cover such a move would give them to make unpopular but cost-conscious decisions not to pay for certain benefits.

What about the uninsured? Mr. Daschle wants to open to all Americans the Federal Employee Health Benefits Plan -- a menu of private-insurance options now accessible only to government workers. He would offer, in addition to the current plans, a government-run program, presumably similar to Medicare, although he provides few details. There would also be some form of means-tested premium support (or tax benefits) for Americans who couldn't afford one of the available plans.

Of course, "Critical" includes plenty of laments about the problems of our current system, from overused drugs to insufficient preventive care. Mr. Daschle also includes the familiar paean to Medicare's "lower administrative costs" without acknowledging the central irony: Most of Medicare's costs are borne by doctors and hospitals that must meet the requirements of a host of regulations; if they do not, they may face federal investigations and lawsuits for noncompliance. Private health plans don't have the luxury of burdening doctors and hospitals in this way. Thus Medicare has a mere handful of mostly generalist clinicians reviewing its coverage and payment decisions. A large private health insurer would have to employ hundreds to accomplish the same task.

Despite the fresh enthusiasm Mr. Daschle shows for his federal health-board proposal, it's not exactly a new idea. Mr. Daschle himself proposed it as part of the failed American Health Security Act of 1993. He admits that the board is loosely based on the National Institute for Clinical Excellence in Britain and the Federal Joint Committee in Germany. Both are charged with managing the public's access to higher-cost drugs, medical devices and procedures. But both are growing increasingly unpopular in their home countries -- precisely because they've become a triumph of cost-containment over patient access and choice.

As for America's own Federal Reserve serving as a model for Mr. Daschle's health board: The comparison seems misjudged. The Fed has a single price-setting role -- determining, through interest rates, the price of money itself. By contrast, a health board would manage the pricing, and use, of tens of thousands of medical products and procedures. How can a single board (instead of, say, the market) make so many decisions, and wisely? Mr. Daschle proposes a dozen or so "experts" who would be "chosen based on their stature, knowledge, and experience, ensuring that the decisions they make have credibility across the health-care spectrum."

Surely this is not the best way to go about reforming the U.S. health-care system. That it needs reforming, though, is beyond dispute. The next occupant of the White House, whatever his party affiliation, will undoubtedly try to broaden insurance coverage. One alternative to empowering government agencies would be simply to help individuals buy affordable private insurance. That effort might start by leveling the playing field between big purchasers, who get better rates for their employees, and individuals, who make up the bulk of the uninsured. People buying into an expanded version of the federal employees' health plan, for instance, would get the same tax advantages, deducting the cost of their health insurance as if they had received it through an employer.

For Pakistanis

Black Flag Week

A Federal Reserve of Health?

Sen. Tom Daschle on The Daily Show

The time is now for us to take this challenge head-on. What we need is a change in approach. In my book, Critical: What We Can Do About the American Health-Care Crisis, I have proposed a Federal Health Board that would be a foundation from which we could address all three problems. In many ways, the Federal Health Board would resemble our current Federal Reserve Board for the banking industry. Just as the Federal Reserve ensures certain standards, transparency and performance for our banking industry, the Fed Health would ensure harmonization across public programs of health-care protocols, benefits, and transparency. Ultimately, the Fed Health would offer a public framework within which a private health-care system could operate more effectively and efficiently.

The Fed Health could help reduce administrative costs. Roughly 30 cents of every dollar in health care is spent on administration rather than health benefits. Our administrative costs, on a per capita basis, are seven times higher than that of our peer nations. Each state has their own system for Medicaid and insurance regulation. We have different health-care systems for active duty military members versus veterans. And private insurers spend billions trying to enroll the healthy and avoid the sick. A Federal Health Board that sets evidence-based standards for benefits and quality for federal programs and insurance will lower this complexity and thus costs.

The Fed Health could also promote quality and save money by making the health-care system more transparent. Today, the lack of transparency in the system makes it virtually impossible for people to grasp what they are paying for and who provides them with the best care. This shroud of secrecy allows for wildly different prices for similar quality care. For example, a Pennsylvania report on heart surgery found hospitals with similar outcomes charge from $20,000 to $100,000. The Board, by ensuring transparency, would increase competition based on price and quality rather than cream skimming and cost sharing.

So why did the crime rate fall in New York?

The Bratton era in New York is remembered chiefly for putting two big ideas into practice: Compstat meetings, which not only analyze crimes and share information and tactics but help hold precinct captains accountable for driving down crime in their neighborhoods; and “broken windows” or “quality of life” policing — that is, the notion that going after low-level crime and signs of civil disorder reaps big dividends in identifying bad guys and reducing public fear. Both can now be found in police departments around the country. Yet Bratton’s biggest accomplishment did not reside in management reform or new strategies. Instead, he reordered the way we think about policing.

In the early 1990s — Bratton took over the Transit Police in 1990, then rose to national prominence after becoming police commissioner in 1994 — police officials around the country argued that their job was to respond to crime. With a few exceptions, they rarely talked about fighting it. As Bratton dismissively put it in his 1998 recounting of his experience, “Turnaround,” “Crime, the theory went, was caused by societal problems that were impervious to police intervention. That was the unchallenged conventional wisdom espoused by academics, sociologists, and criminologists. I intended to prove them wrong.” And, he might have added, police brass everywhere.

During his two years at the helm of the NYPD, homicides fell 44 percent and serious crime overall dropped 25 percent, and they continued to fall after he left. Under Bratton and his small brain trust of tacticians, the NYPD became a laboratory for crime-reduction schemes and strategies — and a proving ground for police officers and officials who took seriously the idea that they could prevent crimes from occurring. “If you watch what goes on in Compstat, and spend time in the precincts and boroughs,” says David Kennedy, director of the Center for Crime Prevention and Control at the John Jay College of Criminal Justice in New York, “you see a lot of what would now be called community policing and problem-solving policing.” What you also saw in the Bratton era was a relentless focus on pursuing new ways to circumvent crime and disorder, including cracking down on the “squeegee men” who were intimidating drivers; interdicting guns; experimenting with deployments; resuscitating walking beats; using minor infractions to stop and frisk young men; and finding ways to solve the problems posed by corner liquor stores, badly controlled nightclubs and other venues that invited crime.

Academics still debate how much of a difference this made — crime fell generally in the United States during the 1990s — and they always will. “There is no way to unpack what happened or to resolve the debates about it,” says David Kennedy. “But I’m in the camp that says you really have to think that policing mattered a whole lot.”

So are city officials all over the country. Faced with a community worried about crime, they can hire a chief who frets that there are limits to what he or she can accomplish. Or they can go with someone inculcated in an attitude that holds, as former NYPD deputy commissioner of operations Garry McCarthy puts it, “Every crime can be prevented. Is it a reasonable expectation? No. But if you shoot that high, you’ll do pretty well.”

That is one reason McCarthy is now police director in Newark, New Jersey, hired earlier this year by Mayor Cory Booker to bring down that city’s high crime rate. The philosophies of policing that McCarthy has been using these past 10 years were, he says, “nurtured in [the Bratton] era.”

Nurtured, and then exported. Bratton, who had an infamous falling-out with then-Mayor Rudy Giuliani and left the NYPD in 1996, has spent almost five years — longer than his entire time as an official in New York — as chief in Los Angeles. John Timoney, who was Bratton’s chief of department in New York, went on to be police chief in Philadelphia, and now holds that position in Miami. Peter Abbott, former head of the NYPD’s mounted and administrative units, is chief in Sarasota, Florida. Jane Perlov, a former deputy chief of detectives in Queens, was Raleigh’s chief from 2001 until earlier this year, when she became chief of security for Bank of America. Patrick Harnett, who was Timoney’s executive officer in New York, served two years as chief in Hartford and is now consulting on police matters in Oakland and San Francisco. Daniel Oates, a former deputy chief in Brooklyn, spent four years as chief in Ann Arbor and since 2005 has been chief in Aurora, Colorado. Ed Norris and Kevin Clark were NYPD veterans who each served stints as chief in Baltimore.

The group’s record is not unblemished. Norris, for instance, brought down Baltimore’s homicide rate during his three-years there but was later convicted of fraud for misusing police department funds. Both Abbott and Oates have struggled with issues of morale among officers who accuse them of being overly demanding and inaccessible. And Bratton, of course, is under fire for his officers’ aggressive handling of a crowd of reporters and bystanders at a May Day immigration rally.

Yet on the whole, the Brattonites’ impact on their departments and on crime commands attention. Timoney provides a dramatic example. Before he arrived in Philadelphia, murders had been topping the 400-mark for years. By the time he’d been there two years, they dropped to less than 300. He left at the end of 2001, and by last year the figure was back above 400. Meanwhile, since he arrived in Miami in 2003, the murder rate has dropped from 20 per 100,000 residents to 14, and the problem Timoney was most expressly brought in to address — police shootings of civilians — has almost abated. Perlov, Abbott, Oates and Bratton himself have also presided over noticeable drops in crime.

While the Bratton basics are having a major impact in other cities, so is — if Providence’s experience with Esserman is any guide — the less tangible conviction that a police department is not an adjunct to community efforts to keep order. It is its centerpiece and organizing force. Even among the Brattonite diaspora, Esserman stands out for an iron-willed determination to explore just how thoroughly a police department can enmesh itself in community life.

- Bratton’s Brigade

Related;
New model police

New York’s police-The thin blue line


The Next Batch of Crime Statistics Won’t Be Much Fun For the Media
Read All About it: Crime Surges Again

Crime-Fighting By Computer: Scope Widens
Rivals Covet Giuliani's Crime Data, Not His Ways

Bratton-Style Policing Raises Hackles Again

Mapping Crime Hot Spots

Jack Maple, 48, a Designer of City Crime Control Strategies
His official rank was only lieutenant in the city's transit police when Police Commissioner William J. Bratton appointed him a deputy commissioner in 1994. Thomas A. Repetto, president of the Citizens Crime Commission, said it was like making a Coast Guard lieutenant a three-star admiral in the Navy.

It paid off. ''Jack was one of the truly great innovators in law enforcement who helped to make New York City the safest large city in America,'' said Mayor Rudolph W. Giuliani, who recently visited him.

Mr. Maple was architect of the department's Compstat program, through which crime statistics are examined weekly at rigorous meetings of top officials and precinct commanders. Mr. Maple, a student of military history, compared the system to Britain's use of radar against Nazi bombers.

Mr. Maple interrogated his subordinates with style. Once, when an inspector was struggling through an explanation, he projected a Pinocchio image on a screen behind the inspector, using a light beam to make the figure's nose grow.

But the system allowed the police to act against crime, rather than just react. Though Compstat may sound like common sense, Mr. Bratton said that it marked a radical departure. ''The best-kept secret in the United States is how ineffective police have been in fighting crime,'' he said. One reason Compstat worked was that it allowed top officials to question lower-level commanders directly. ''Jack Maple cleaned out the whole middle level of bureaucracy,'' said Richard Emery, a civil rights lawyer.

Compstat won an award from the Ford Foundation as an innovation in American government, and has been adopted in scores of other cities -- including New Orleans, Newark and Baltimore -- some of which Mr. Maple advised as a consultant after he left the department in 1996. Mr. Bratton calls Mr. Maple the smartest man on crime matters he ever met.

Boardroom Tactics Utilized In the Battle Against Crime

It is 8 A.M. and Jack Maple, a Deputy New York City Police Commissioner, and Louis R. Anemone, one of the department's super chiefs, are facing a room full of commanders of precincts and detective squads.

One by one, the commanders -- mainly captains, lieutenants and sergeants -- have been rising to report on crime in their neighborhoods and what they have been doing about it.

Armed with the latest precinct statistics, Mr. Maple and Chief Anemone press the commanders on how they have been carrying out the department's new strategies on dealing with guns and drugs and on improving the quality of life in the city as well as following Commissioner William J. Bratton's mandate that every officer be prepared to respond to any type of crime rather than shift responsibility to special units.

Such meetings, which are much like those regularly held by major corporations, may seem a little thing, but they are new to the New York City Police Department and they are rare among departments around the country. Mr. Bratton, who took charge of the department in January, started the meetings in April as a way of making sure that sweeping changes he is introducing are being put into effect. He personally attends some of them. Perhaps more than any other single thing the department is doing, the meetings reflect the Commissioner's intent to mobilize the tools of corporate management as he searches for "creative ways to reduce crime and the fear of crime."

The meetings, Mr. Bratton said, are "a phenomenal accountability tool." Focusing on Crime

"People have got to have an answer or they're going to be somewhat publicly embarrassed in front of their peers," he said. "I also get to hear from sergeants I would not normally see. It's a way of identifying talent."

It is also a way to rivet attention on the department's principal task: countering crime.

In contrast to Mr. Bratton's approach, said Lawrence Sherman, a professor of criminology at the University of Maryland, most police chiefs concentrate their energies on logistical and administrative matters rather than actual law enforcement.

"Police officers should think in terms of patterns," he said. "But all too often they have thought in terms of individual cases and of schedules and maintenance. Innovative police agencies are oriented to problem solving, and this is a big switch."

Hubert Williams, the president of the Police Foundation, a research organization in Washington, and a former director of police in Newark, said the meetings "set the tone and tenor" for Mr. Bratton's department.

"He's obviously opening up lines of communication and establishing methods by which he can effect control over a very, very large department," Mr. Williams said.

The meetings are clearly a departure from the past. Patrick V. Murphy, who ran the Police Department under Mayor John V. Lindsay in the early 1970's, followed a military-style chain of command. He talked to the brass and they talked to the troops. Lee P. Brown, who came to New York from Houston to work for Mayor David N. Dinkins and introduced the concept of community policing in New York, met weekly with his senior civilians and officers and individually with precinct commanders. His successor, Raymond W. Kelly, met weekly with his senior aides.

"Internal communications are not very good in most police departments," said Mr. Murphy, who is the director of the police policy board of the United States Conference of Mayors in Washington.

The Nation; Guys, Dolls and Winning the War on Crime

The Bratton-Maple partnership was a major reason that Mayor Rudolph W. Giuliani was able to keep his campaign promise to reduce crime, which so impressed voters that, in today's mayoral free-for-all, all the candidates feel compelled to announce that they will continue the effort, even as they maneuver to distance themselves from some of the brutality that came with it.

Mr. Maple pressed for more and better information. He demanded crime numbers from each precinct daily, not once every six months. These numbers were updated on localized maps. He persuaded Mr. Bratton to have weekly meetings during which Mr. Maple and other commissioners debriefed precinct, narcotics and squad commanders, a system that became known as Compstat.

Today, about one-third of the nation's larger police departments have adopted the system, with Baltimore applying it to its entire government. Recently, Mr. Giuliani has been talking about doing the same.

Compstat brought a previously unimaginable level of accountability to the New York Police Department. As Mr. Maple wrote in his book ''The Crime Fighter: Putting the Bad Guys Out of Business'': ''I designed the process knowing that an organization as large as the N.Y.P.D. never gets to Nirvana. Trouble arose only if the commanders didn't know why the numbers were up or didn't have a plan to address the problem.''

Mr. Maple's trip to the top was a long slog, even though he was one of the youngest detectives in the department's history, and despite his record high score on the lieutenant's exam. As a young cave cop, he annoyed his bosses, who hated the large numbers of arrests he made, each of which made more paperwork for them. For his zeal he was once punished by being assigned to the northern Bronx when they knew he lived in southeastern Queens.

Research Links Lead Exposure, Criminal Activity

Although crime did fall dramatically in New York during Giuliani's tenure, a broad range of scientific research has emerged in recent years to show that the mayor deserves only a fraction of the credit that he claims. The most compelling information has come from an economist in Fairfax who has argued in a series of little-noticed papers that the "New York miracle" was caused by local and federal efforts decades earlier to reduce lead poisoning.

The theory offered by the economist, Rick Nevin, is that lead poisoning accounts for much of the variation in violent crime in the United States. It offers a unifying new neurochemical theory for fluctuations in the crime rate, and it is based on studies linking children's exposure to lead with violent behavior later in their lives.

What makes Nevin's work persuasive is that he has shown an identical, decades-long association between lead poisoning and crime rates in nine countries.

"It is stunning how strong the association is," Nevin said in an interview. "Sixty-five to ninety percent or more of the substantial variation in violent crime in all these countries was explained by lead."

Why Did Crime Fall in New York City?

Did the “broken windows” strategy and CompStat drive down crime in New York City in the 1990s?

The coming global food crisis

Your brain caught at "cooking the books,"

SCIENTISTS AT CALTECH and Stanford recently published the results of a peculiar wine tasting. They provided people with cabernet sauvignons at various price points, with bottles ranging from $5 to $90. Although the tasters were told that all the wines were different, the scientists were in fact presenting the same wines at different prices.

The subjects consistently reported that the more expensive wines tasted better, even when they were actually identical to cheaper wines.

The experiment was even more unusual because it was conducted inside a scanner - the drinks were sipped via a network of plastic tubes - that allowed the scientists to see how the subjects' brains responded to each wine. When subjects were told they were getting a more expensive wine, they observed more activity in a part of the brain known to be involved in our experience of pleasure.

What they saw was the power of expectations. People expect expensive wines to taste better, and then their brains literally make it so. Wine lovers shouldn't feel singled out: Antonio Rangel, the Caltech neuroeconomist who led the study, insists that he could have used a variety of items to get similar results, from bottled water to modern art.

Expectations have long been a topic of psychological research, and it's well known that they affect how we react to events, or how we respond to medication. But in recent years, scientists have been intensively studying how expectations shape our direct experience of the world, what we taste, feel, and hear. The findings have been surprising - did you know that generic drugs can be less effective merely because they cost less? - and it's now becoming clear just how pervasive the effects of expectation are.

The human brain, research suggests, isn't built for objectivity. The brain doesn't passively take in perceptions. Rather, brain regions involved in developing expectations can systematically alter the activity of areas involved in sensation. The cortex is "cooking the books," adjusting its own inputs depending on what it expects.

-What wine can tell us about the nature of reality

Lord of War arrested

In 2005, Mr. Bout was described by Amnesty International as “the most prominent foreign businessman” involved in trafficking arms to nations that are embargoed by the United Nations. Mr. Bout, who also goes by the first names Victor and Vic, was said to be the inspiration for the film “Lord of War,” starring Nicolas Cage, about an unscrupulous arms trafficker.

-Major Arms Dealer Arrested in Thailand

China's fight against inflation

An American Hero

Free Breast Implants!

Robert Reich on The Colbert Show

Is corruption a violation of the fundamental human rights?

One lawyer thinks so- Prof. Ndiva Kofele-Kale;

Q.A common thread in your writings is that corruption by high-ranking government officials is a violation of the fundamental human rights of citizens in developing countries. What is your response to those who argue that this is pushing the concept of human rights too far because corruption is essentially a non-violent crime?

A. One could say the same for the right to freedom of thought which is also a non-violent crime. In the event, I do not accept the characterization of grand corruption as a non-violent crime because the violence it wrecks on the economies of victim states as well as their populations is undeniable. When you live in a country where your Government spends less than 2 percent, or a miserly $106 per capita, of the national budget for health service; where 30% of the population is unemployed, 4 of every 10 children under age 5 suffer from malnutrition; where for every 1,000 babies born 101 die at birth, few ever get to visit a doctor since your country can only boast 125 physicians, only 44 percent of the population has access to potable water; and your President criss-crosses the globe in a $30 million state-of-the-art airplane and maintains $700 million in several foreign bank accounts for that rainy day while his unemployed wife has access to a bank credit card with a $10,000 daily spending limit and their adult sons own multimillion mansions in the Cote d’Azur, it would be hard to convince this person that official corruption is a non-violent crime!

Colbert's advice to McCain

NYT's coolest blog

On the Runway

Tajikistan lied to IMF?

A recent press release from IMF;

Based on new information provided by the authorities to IMF staff in December 2007 and January 2008, the Executive Board concurs that these disbursements were made on the basis of inaccurate information provided by the Tajik authorities relating to the performance criteria on the net international reserves of the Republic of Tajikistan, the net domestic assets of the National Bank of Tajikistan (NBT), and against the NBT issuing directed credits. The Board agreed that the Republic of Tajikistan shall be expected to repay the Fund the three noncomplying disbursements (related to the fourth, fifth, and sixth review) that were not discharged under Multilateral Debt Relief Initiative (MDRI) relief, which amount to a total of SDR29.4 million (about US$47.4 million), together with any interest accrued, in six equal monthly installments starting with the first installment no later than September 5, 2008, and concluding with the sixth and final installment no later than February 5, 2009. The Board expressed its regret on the nature and extent of misreporting, and emphasized the seriousness it attaches to the fact that MDRI resources extended to Tajikistan cannot be made subject to repayment.

In taking its decision, the Executive Board carefully weighed the Republic of Tajikistan's very difficult economic circumstances , in particular its balance of payments position as well as the severe humanitarian crisis prevailing in the country, against serious instances of misreporting by the Tajik authorities. Accordingly, the Executive Board decided to make use of its discretion to extend the repayment period beyond the normal 30-day repayment expectation period called for under the misreporting framework.

Moreover, the Executive Board reviewed matters related to misreporting under Article VIII, Section 5, of the IMF's Articles of Agreement by the Republic of Tajikistan. It found that the Republic of Tajikistan had breached its obligations under Article VIII, Section 5, of the IMF's Articles of Agreement, which obliges member countries to furnish such information as the Fund deems necessary for its activities.

Photo of the Day

President Bush showed off some dancing moves for the cameras while he waited for Senator John McCain and his wife, Cindy

Assorted

"Fisking" Modern Monetarism

Tabulating the Credit Crunch's Effects: One Educated Guess

UK vs US taxes

Did you say “decoupling”?

Real interest rates are now negative

Why public opinion polls are garbage

Separating Good Polls From Bad

What the Unemployment Rate Misses
Unemployment and the Unemployment Rate
Labour isn't working
A very long post about labor force participation that you should read anyway

The Citizen's Guide to the 2007 Financial Report of the United States Government

Institutions and Development: The Second Wave

Fed Officials Downplay TIPS Inflation Signal


CBO analysis of the President’s budget

If the President’s proposals were enacted, the federal government would record deficits of $396 billion in 2008 and $342 billion in 2009. Those deficits would amount to 2.8 percent and 2.3 percent, respectively, of gross domestic product (GDP). By comparison, the deficit in 2007 totaled 1.2 percent of GDP.

People Watch

Ziggy Marley, son of Bob Marley


Yo-Yo Ma

How prepared is Indonesia for another tsunami

The Indonesian island of Sumatra is bracing itself for a powerful earthquake, after three tremors in as many weeks

Book I received today from Amazon

The Cult of Statistical Significance
How the Standard Error Costs Us Jobs, Justice, and Lives
Stephen T. Ziliak and Deirdre N. McCloskey

You might want to preorder the following book;

The Economic Conversation
by Arjo Klamer , Deirdre McCloskey , Stephen Ziliak

The Economic Conversation is a new principles of economics textbook, designed to make students aware of the rhetoric of the discipline of economics through the use of dialogue--"conversations" among the authors, as well as a few fictional students. The goal is to draw attention to the assumptions, goals and values that underlie economic principles, and to do so in a manner that introduces them to coherent and well-known alternative economic perspectives.

Celebrity Headline of the Day

"Dirty Dancing" star Patrick Swayze has cancer

Whats the "true" unemployment rate?

Unemployed, and Skewing the Picture

The president and Senator John McCain also recently noted that unemployment remained low. Senators Judd Gregg of New Hampshire and Johnny Isakson of Georgia, both Republicans, have said the economy continues to be at “full employment.” Two Democratic governors, Christine Gregoire of Washington and Joe Manchin III of West Virginia, have bragged that their states recently recorded their lowest unemployment rates in history.

Statistically, all this is true enough. But it’s also deeply misleading.

Over the last few decades, there has been an enormous increase in the number of people who fall into the no man’s land of the labor market that Carroll Wright created 130 years ago. These people are not employed, but they also don’t fit the government’s definition of the unemployed — those who “do not have a job, have actively looked for work in the prior four weeks, and are currently available for work.”

Consider this: the average unemployment rate in this decade, just above 5 percent, has been lower than in any decade since the 1960s. Yet the percentage of prime-age men (those 25 to 54 years old) who are not working has been higher than in any decade since World War II. In January, almost 13 percent of prime-age men did not hold a job, up from 11 percent in 1998, 11 percent in 1988, 9 percent in 1978 and just 6 percent in 1968.

Even prime-age women, who flooded into the work force in the 1970s and 1980s, aren’t working at quite the same rate they were when this decade began. About 27 percent of them don’t hold a job today, up from 25 percent in early 2000.

There are only two possible explanations for this bizarre combination of a falling employment rate and a falling unemployment rate. The first is that there has been a big increase in the number of people not working purely by their own choice. You can think of them as the self-unemployed. They include retirees, as well as stay-at-home parents, people caring for aging parents and others doing unpaid work.

If growth in this group were the reason for the confusing statistics, we wouldn’t need to worry. It would be perfectly fair to say that unemployment was historically low.

The second possible explanation — a jump in the number of people who aren’t working, who aren’t actively looking but who would, in fact, like to find a good job — is less comforting. It also appears to be the more accurate explanation.

The smart education system of Finland

What Makes Finnish Kids So Smart?

The academic prowess of Finland's students has lured educators from more than 50 countries in recent years to learn the country's secret, including an official from the U.S. Department of Education. What they find is simple but not easy: well-trained teachers and responsible children. Early on, kids do a lot without adults hovering. And teachers create lessons to fit their students. "We don't have oil or other riches. Knowledge is the thing Finnish people have," says Hannele Frantsi, a school principal.

Visitors and teacher trainees can peek at how it's done from a viewing balcony perched over a classroom at the Norssi School in Jyväskylä, a city in central Finland. What they see is a relaxed, back-to-basics approach. The school, which is a model campus, has no sports teams, marching bands or prom.

Two Advisors

Brian Deese, senior economic policy adviser to Senator Hillary Clinton,says Clinton's Dialogue Influenced by Economy

McCain Adviser Silvia Says Economics to Decide Election

Blumenthal Says Clinton, Obama Health Plans Are Similar

India is ill-equipped to cope with shocks?

Interesting article by Ajay Shah;

There are now strong fears of a global recession, and the US economy has perceptibly slowed. As yet, there is little distress in India. The last twelve months had exports growth of 20.3%, compared with 22.4% in the previous twelve months. I track transport equipment exports as a measure of how modern manufacturing exports are faring. This shows an acceleration in the latest 12 months of data to 40%, compared with 24.5% in the previous 12 months.

Things look good. My main claim in this article is that things look deceptively good. Owing to a flawed macro policy framework, India is ill-equipped to cope with shocks. In a mature market economy, fiscal policy and primarily monetary policy stabilise the business cycle. Neither of these responses are found in India.

The most important element in thinking about the Indian business cycle is investment. Gross capital formation went up sharply from 23.8% in 2002-03 (the lowest GDP growth in recent times) to 34.6% in 2007-08: a swing of more than 10% of GDP. Roughly half of investment is by the private corporate sector, so the decisions of CEOs on investment matter greatly.

Investment by the private sector is driven by expectations about the future. Projects are undertaken when there is a good likelihood of profits, and vice versa. The autonomous swings of expectations, and thus private investment demand, are now the most important source of fluctuations of GDP. Some observers think that the tax breaks given by Budget 2008 will stimulate demand and hence GDP growth. However, if the spectacle of MPs cheering the debt waiver hampers investment confidence, the size of that impact could dwarf the small tax breaks that have been given out.

If a global recession unfolds, many global firms would be selling goods at low prices in an attempt to preserve capacity utilisation and market share at a time of soft demand. This would impact on the profitability of a large swathe of corporate India, owing to `import parity pricing'. The channel through which a global recession impacts upon the domestic business cycle runs from global prices to corporate profitability to corporate investment.

Regardless of whether difficulties arise because political uncertainty triggers off fears in the minds of CEOs, or because a global economic slowdown impacts on India, the question is: What happens in a slowdown?

In a mature market economy, when a downturn comes, tax revenues go down. Expenditures on programs such as NREG go up. The deficit enlarges. At the same time, there is never any fear of a fiscal crisis. In India, fiscal deficits and public debt are in unsafe territory. As a consequence, in good times, tax revenues are buoyant and the government spends. When a downturn comes, tax revenues come down, and there is no fiscal space to enlarge the deficit. Even today, after a few years of an unprecedented business cycle upturn, we do not have the space to enlarge the fiscal deficit in a downturn. Thus, fiscal policy in India does not play a stabilising role.

In a mature market economy, the central bank moves the short-term interest rate to stabilise the economy. When times are good, the policy rate goes up. When times are bad, it is dropped. The actual mechanics through which this is done is by targeting inflation. Buoyant business cycle conditions lead to pressure on prices. Central banks target inflation, so when inflationary pressures are found, the policy rate is raised, and vice versa. In a mature market economy, the central bank does not worry about exchange rates, banking regulation, or all the other things that RBI does; it only cares about the business cycle.

In India, none of this is in place. RBI is a central bank in name, but in behaviour, it does not look like the central banks of mature market economies. The drama of the credit policy announcement mimics what real central banks do. However, monetary policy setting actually takes place every day in RBI's currency trading.

Exchange rate pegging has increasingly robbed RBI of the autonomy to think about inflation or business cycle conditions. As an example, interest rates were sharply raised in January 1998, at a time when Indian business cycle conditions were gloomy. From 2002 onwards, when a massive business cycle upsurge came along, real interest rates were dropped owing to exchange rate pegging.

RBI does not have the institutional mechanisms through which interest rate setting can stabilise the business cycle. Even if this is rapidly put into place, the next leg of the story - the `monetary transmission' - is missing. The monetary transmission is the market process through which changes to the short-term rate by the central bank lead to changes in all interest rates in the economy. This requires a properly functioning Bond-Currency-Derivatives Nexus. India lacks this, owing to a repressive license-permit raj. Even if the task of interest rate setting were done correctly, it would fail to exert a stabilising influence on the economy until the BCD Nexus is put into place.

Without mechanisms of stabilisation, GDP growth has swung from 3.8% in 2002-03 to 9.6% just four years later. If and when a slowdown commences, it will be nastier than what we see in mature market economies. India has a high trend GDP growth rate, but a substantial volatility around this owing to the poorly constructed macroeconomic policy framework.

A different perspective on American democracy

Ralph Nader on the Daily Show

Indian growth and poverty reduction

India: Is the Rising Tide Lifting All Boats?

Summary: While many have celebrated India's accelerating economic growth, some have expressed concern about the distributional impacts of the growth process. Cognizant of the vulnerability of its large population below poverty, India's authorities have made faster and more inclusive economic growth the primary goal of their development strategy. This paper aims to document how the benefits of economic expansion were shared across the income distribution over the last two decades using disaggregate household level data. Experiences across Indian states suggest an important role for economic policy in shaping the inclusiveness of growth. States with higher financial development, more flexible labor markets, and higher average education experienced greater relative gains for the poor. Improving infrastructure may also lead to a growth process that is more inclusive of the poor.

Medical Advice

Overlooked Lesions Tied to Colon Cancer

An easily overlooked type of abnormality in the colon is the most likely type to turn cancerous, and is more common in this country than previously thought, researchers are reporting.

The findings come from a study of colonoscopy, in which a camera-tipped tube is used to examine the lining of the intestine. Generally, doctors search for polyps, abnormal growths that stick out from the lining and can turn into cancer. But another type of growth is much more dangerous, and harder to see because it is flat or depressed and similar in color to healthy tissue.

Stephen S. Roach sees Japan in US downturn

The central question for the economy is this: Will this medicine work? The same question was asked repeatedly in Japan during its “lost decade” of the 1990s. Unfortunately, as was the case in Japan, the answer may be no.

If the American economy were entering a standard cyclical downturn, there would be good reason to believe that a timely countercyclical stimulus like that devised by Washington would be effective. But this is not a standard cyclical downturn. It is a post-bubble recession.

The United States is now going through its second post-bubble downturn in seven years. Yet this one stands in sharp contrast to the post-bubble shakeout in the stock market during 2000 and 2001. Back then, there was a collapse in business capital spending, a sector that peaked at only 13 percent of real gross domestic product.

The current recession has been set off by the simultaneous bursting of property and credit bubbles. The unwinding of these excesses is likely to exact a lasting toll on both homebuilders and American consumers. Those two economic sectors collectively peaked at 78 percent of gross domestic product, or fully six times the share of the sector that pushed the country into recession seven years ago.

For asset-dependent, bubble-prone economies, a cyclical recovery — even when assisted by aggressive monetary and fiscal accommodation — isn’t a given. Over the past six years, income-short consumers made up for the weak increases in their paychecks by extracting equity from the housing bubble through cut-rate borrowing that was subsidized by the credit bubble. That game is now over.

Washington policymakers may not be able to arrest this post-bubble downturn. Interest rate cuts are unlikely to halt the decline in nationwide home prices. Given the outsize imbalance between supply and demand for new homes, housing prices may need to fall an additional 20 percent to clear the market.

Aggressive interest rate cuts have not done much to contain the lethal contagion spreading in credit and capital markets. Now that their houses are worth less and loans are harder to come by, hard-pressed consumers are unlikely to be helped by lower interest rates.

Japan’s experience demonstrates how difficult it may be for traditional policies to ignite recovery after a bubble. In the early 1990s, Japan’s property and stock market bubbles burst. That implosion was worsened by a banking crisis and excess corporate debt. Nearly 20 years later, Japan is still struggling.

There are eerie similarities between the United States now and Japan then. The Bank of Japan ran an excessively accommodative monetary policy for most of the 1980s. In the United States, the Federal Reserve did the same thing beginning in the late 1990s. In both cases, loose money fueled liquidity booms that led to major bubbles.

Moreover, Japan’s central bank initially denied the perils caused by the bubbles. Similarly, it’s hard to forget the Fed’s blasé approach to the asset bubbles of the past decade, especially as the subprime mortgage crisis exploded last August.

In Japan, a banking crisis constricted lending for years. In the United States, a full-blown credit crisis could do the same.

The unwinding of excessive corporate indebtedness in Japan and a “kereitsu” culture of companies buying one another’s equity shares put extraordinary pressures on business spending. In America, an excess of household indebtedness could put equally serious and lasting restrictions on consumer spending.

Like their counterparts in Japan in the 1990s, American authorities may be deluding themselves into believing they can forestall the endgame of post-bubble adjustments. Government aid is being aimed, mistakenly, at maintaining unsustainably high rates of personal consumption. Yet that’s precisely what got the United States into this mess in the first place — pushing down the savings rate, fostering a huge trade deficit and stretching consumers to take on an untenable amount of debt.

A more effective strategy would be to try to tilt the economy away from consumption and toward exports and long-needed investments in infrastructure.

-Double Bubble Trouble

Italian court orders Italians to be more decent

In a landmark judgement with far-reaching social implications, Italy's highest appeals court has ruled it is a criminal offence for Italian men to touch their genitals in public.

The judges of the court of cassation stressed that the ban did not just apply to brazen crotch-scratching, but also to what might be termed superstitious pre-emption. Anyone who has seen a hearse go past in Italy, or been part of a discussion in which some terrible illness or disaster is mentioned, will know it is traditional for men to ward off bad luck with a quick grab at what are delicately called their "attributi".

The practice has become increasingly frowned on, but "io mi tocco i … ", which translates as "I touch my … " is still a common phrase, roughly equivalent to "fingers crossed". The judges helpfully suggested that those seeking reassurance should wait till they had returned to the privacy of their own homes before letting their hands stray trouser-wards.

The court was ruling on the appeal of an unnamed 42-year-old workman from Como near Milan. In May 2006, he was convicted of indecent behaviour for "ostentatiously touching his genitals through his clothing". His lawyer said it was merely a "compulsive, involuntarily movement, probably to adjust his overalls".

-Touch your privates in private, court tells Italian men

Quote of the Day

“It ain’t the things you don’t know that hurt you, it’s the things you know that ain’t true.” -Robert Solow

(cited in Popular Myths about the World Economy)

To be prolific means your desk should be like the following

"If Buckley's 5,600 biweekly newspaper columns, "On the Right," were collected in one place, they would fill 45 medium-sized volumes. He is the author of at least 50 books."

via Thinking on the Margin

Cass Sunstein on Obama, etc

On Obama, the law professor,

“He was passionately engaged with the material in a beautifully nonpartisan way, ..[taught] in a relaxed curious intensity”

Macroeconomic Briefing for the Day

"For the Fed, a Recession -- Not Inflation -- Poses Greater Threat",

Obama and Trade, TAF, J-Curve

Two Questions: What Do Slowing Imports Mean? And Is There a J-Curve?

Fisher on Inflation, Mishkin on Home Prices

Can Currency Moves Predict Commodity Prices?

The Road More Travelled on Regional Integration

Integration of markets vs. integration by agreements

Summary: This paper provides an analysis of the two channels of regional integration: integration via markets and integration via agreements. Given that East Asia and Latin America are two fertile regions where both forms of integrations have taken place, the authors examine the experiences of these two areas. There are four related results. First, East Asia had been integrating via markets long before formal agreements were in vogue in the region. Latin America, by contrast, has primarily used formal regional trade treaties as the main channel of integration. Second, despite the relative lack of formal regional trade treaties until recently, East Asia is more integrated among itself than Latin America. Third, from a purely economic and trade standpoint, the proper sequence of integrations seems to be first integrating via markets and subsequently via formal regional trade agreements. Fourth, regional trade agreements often serve multiple constituents. The reason why integrating via markets first can be helpful is because this can give stronger political bargaining power to the outward-looking economic-oriented forces within the country.

Debating Economics

Will Wilkinson vs Stephen Marglin
on The Dismal Science: How ­Thinking Like An Economist Undermines Community

Watch it on Blogging Heads

Related;
Mankiw’s Principles of Economics, ‘dumped down’

Think about it

Which has more value added: college or prison?

Vermont tops the list of states that spend more money on prisons than on higher education, according to a report released Thursday.
more stories like this

The state spends $1.37 on corrections for every $1 spent on public universities and community colleges, according to the Pew Center on the States' Public Safety Performance Project.

Gov. Jim Douglas called it "a dubious distinction. I'm proud of being number one in things like cleanest and safest state in America and the healthiest and smartest, but not in areas like that."

Peter Gallagher not convinced by the Garnaut report

The Garnaut Climate Review Interim Report—I’m not convinced (Australia's equivalent of the Stern Report)

Related Podcast;
Climate Change, Energy and the Way Ahead

Foreign Direct Investment in South Asia

A recent publication from ADB- South Asia Economic Report-Foreign Direct Investment in South Asia

Managing Capital Flows in Korea

Managing Capital Flows: The Case of the Republic of Korea

The Republic of Korea has recently experienced: (i) large capital inflows, in particular a surge in portfolio inflows, and (ii) an appreciation of asset prices, including stock prices, land prices, and nominal and real exchange rates. We first document the recent trend in capital inflows and asset prices in Korea, and review how a surge in capital inflows can increase asset prices. Then, we empirically investigate the effects of capital inflows on asset prices using a VAR model. The empirical results suggest that capital inflows shocks increased the stock prices but not land prices. The effects on the nominal and real exchange rates are limited, and this is related to the accumulation of foreign exchange reserves. A catch-all solution to the problems that capital inflows present does not seem to exist. Therefore, the most should be made of the available instruments at hand.

High Food Prices and its effects

Bangladesh has banned exports of soybean oil and palm oil for six months to halt soaring prices in the country's retail market, officials said on Monday.

"We have banned soybean and palm oil exports to keep domestic prices stable," Commerce Secretary Feroz Ahmed told Reuters.

Retail edible oil prices have jumped over 37 percent to 110 taka ($1.60) a litre over the past six months.

Bangladesh is totally dependent on imports of crude soybean and palm oil to meet domestic demands, but some refiners export the refined oil to India.

Refined oil is also smuggled out mainly to neighbouring Myanmar, police and traders said.

Bangladesh imports nearly 1 million tonnes of crude palm oil, 500,000 tonnes of crude soybean and 500,000 tonnes of rapeseed annually to meet local demand.

-Bangladesh bans exports of soybean, palm oil

Related;
High Food Prices - A Harsh New Reality

Self Help at Google

Sonja Lyubomirksy, "The How of Happiness: A Practical Guide to Getting the Life You Want."


Innovate Like Edison: The Success System of America's Greatest Inventor


Esther Gokhale on self-help guide to overcoming back pain, 8 Steps to a Pain-Free Back

Assorted on SWFs

Sovereign Wealth Fund Radar

Assorted Podcasts

Stiglitz Says Iraq War Totally Financed With Borrowing

The Life of William F. Buckley, Jr

Sovereign wealth funds

Why frogs don't like mobile phones

Karl Case Discusses Danger of `Absolving' Foreclosures

CBO's Orszag Sees `Gaps' in U.S. Life-Expectancy Rates

Now Canadian parliament is fighting over NAFTA

Memo Gives Canada’s Account of Obama Campaign’s Meeting on Nafta

While campaigning in Ohio, Mr. Obama has harshly criticized the North American Free Trade Agreement, which many Ohioans blame for an exodus of jobs. He agreed last week at a debate with Senator Hillary Rodham Clinton that the United States should consider leaving the pact if it could not be renegotiated.

On Monday, a memorandum surfaced, obtained by The Associated Press, showing that Austan D. Goolsbee, a professor of economics at the University of Chicago who is Mr. Obama’s senior economic policy adviser, met officials last month at the Canadian consulate in Chicago.

According to the writer of the memorandum, Joseph De Mora, a political and economic affairs consular officer, Professor Goolsbee assured them that Mr. Obama’s protectionist stand on the trail was “more reflective of political maneuvering than policy.”

It also said the professor had assured the Canadians that Mr. Obama’s language “should be viewed as more about political positioning than a clear articulation of policy plans.”

Related;
"Why People Hate Economists (and Why We Don't Care)"
Empirical Public Finance

Hello Young Workers: One Way to Reach the Top Is To Start There
The Unemployment Myth

China Poverty Fact of the Day

From World Bank;

The new PPPs reveal that prices are about 40 percent higher than had been assumed under the old PPP, which was an academic guestimate. Some researchers immediately applied the new PPP conversion factor for GDP to household data and came up with hugely higher estimates of the $1 per day poverty rate for China. However, the World Bank does not use the GDP conversion factor in measuring poverty. The research department of the bank will produce a conversion factor for poverty analysis that takes account of two important things:

(1) the basket actually consumed by the poor is different from the GDP basket; and

(2) the poor almost exclusively live in rural areas where prices are lower.

This work is still underway but the research department has given us a range for their new estimates. Their old estimate of $1 per day poverty rate was 10% in 2004; the new estimate will be in the range of 13-17%. Does this mean that there has been less poverty reduction than had been trumpeted? Actually, just the opposite: there has been more.

The reason for this is that the better price data will also be applied to earlier estimates of poverty (all of which are based on constant Chinese yuan data). The World Bank estimate of $1 per day poverty in China at the beginning of reform will be raised to somewhere in the range of 71-77%. The old estimate was 64%. So, we used to think that 54% of China’s huge population had been lifted out of poverty during economic reform. The improved estimate will be around 59%.

A fairy tale about 'O.K.'

A little-known fact about Martin Van Buren so that at least you take something away from today’s breakfast. He went on to become president, but that’s not so relevant. He contributed a word to the English language. And that word is what we use every day and that word is “O.K.” When Martin Van Buren was president and he wanted to get out of the White House he would put the initials O.K. on a memorandum and what it stood for was “Off to Kinderhook.” That is the derivation of the word O.K.

- NY Governor Spitzer

For the actual history of O.K see the following post on NYT;
A Spitzer Tale Is Not ‘Oll Korrect’

Colbert, Amitabh Bachchan fan!

Shashi Tharoor, The Elephant, the Tiger,
& the Cell Phone, India: The Emerging 21st-Century Power

How to make a film Martin Scorsese way

War on Malaria

That is, for exterminating the parasite everywhere and forever, except perhaps in laboratory storage, as has thus far happened to just one disease in history, smallpox.

Their call, delivered at a malaria conference that they had convened in Seattle, was, in Mrs. Gates’s language, “audacious.” Her husband went further, asking, “Why would anyone want to follow a long line of failures by becoming the umpteenth person to declare the goal of eradicating malaria?”

To many public health leaders, that remains a good question. While some, including the heads of the Global Fund to Fight AIDS, Tuberculosis and Malaria and the President’s Malaria Initiative, have lauded the Gateses’ call as inspirational, others call it noble but quixotic, because the tools to eradicate malaria do not yet exist. A few, including the combative chief of malaria for the World Health Organization, have even argued that it could do harm.

Dr. Margaret Chan, director general of the W.H.O., backed the call, telling the audience from the dais in Seattle, “I dare you to come along with us.”

Last month on his swing through Africa, President Bush implicitly endorsed the idea without mentioning the Gateses, saying the United States would lead the eradication effort.

The Bill & Melinda Gates Foundation has spent $1.2 billion to fight malaria, which is thought to cause as many as 500 million infections a year in 107 countries, a million of them fatal.

Virtually no experts expect it to be eradicated in the lifetimes of the Gateses or the Bushes. Dr. Regina Rabinovich, the foundation’s head of infectious disease, said the Gateses knew it was a long-term undertaking, not possible without more money, better health systems and probably a vaccine, which is still far off.

Dr. Arata Kochi, the W.H.O. malaria chief, went further than other skeptics, arguing that the specter of eradication is counterproductive. With enough money, he said, current tools like nets, medicines and DDT could drive down malaria cases 90 percent.

“But eliminating the last 10 percent is a tremendous task and very expensive,” Dr. Kochi said. “Even places like South Africa should think twice before taking this path.”

False hopes, he said, lead governments to hope for miracles instead of accepting the mundane budget-draining control policies that he endorses. For example, health officials from Rwanda and Zanzibar, having drastically cut malaria within their borders, have asked him about seeking money for elimination.

Even relatively wealthy countries rarely succeed at that. South Africa, Saudi Arabia and Mexico all control cases but see new ones imported — from Mozambique, Yemen and Guatemala, respectively, he said.

Dr. Awash Teklehaimanot, director of the malaria program at the Earth Institute of Columbia University, said he worried that calls for eradication raised expectations too high, inviting frustration and a loss of political will.

“Maybe 10, 15 years from now, we should consider this,” he said.

This debate occurs more in the hallways of malaria conferences than in public, because some scientists fear that a zeal for eradication is now compulsory.

Dr. Rabinovich denied that, saying foundation decisions were not based “on whether or not people agree with public statements made by Bill and Melinda.”

-Eradicate Malaria? Doubters Fuel Debate

Why are Companies piling up cash

One study shows that the average cash ratio doubled from 1998 to 2004 and the median ratio more than tripled, while debt levels fell. According to S.& P., the total cash held by companies in its industrial index exceeded $600 billion in February, up from about $203 billion in 1998.

René M. Stulz, who holds the Reese chair in banking and monetary economics at the Fisher College of Business at Ohio State University, said research he conducted with two other professors on corporate cash levels since 1980 indicated that growing cash holdings over that period most likely reflected the simple fact that the world became a much riskier place for business.

“Companies responded to those rising risks by saving more,” said Professor Stulz, whose study excluded utilities and financial companies because their cash reserves are monitored by regulators.

An even longer savings trend was spotted by Jason DeSena Trennert, managing partner and chief investment strategist at Strategas Research Partners in New York, who said his own rough examination of corporate balance sheets shows that “cash, as a percent of total assets, is as high as it’s been since the 1960s.”

-Companies Are Piling Up Cash