The Economist: Business in America

The latest issue of The Economist has a special report on Business in America. You can view it here. Some passages which stuck out to me:

Second, one can look at America’s admirable record of dealing with turmoil. A study by the Ewing Marion Kauffman Foundation, a think-tank that studies entrepreneurialism, found that America’s high rate of economic “churning” boosts productivity and hence material well-being. Between 1977 and 2005 some 15% of all American jobs were destroyed each year as firms closed or cut back. Thanks to the expansion of successful firms and the entry of new ones, however, many more jobs were created than destroyed. Start-ups (ie, firms less than five years old) provided a third of the new jobs during this period.

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But the central problem is that most Americans get their health insurance through their employers. This dates back to the era of post-war wage controls, when firms offered benefits instead of pay rises. Today’s tax code sets it in stone. Employers can buy health insurance with pre-tax dollars. Individuals cannot.

This creates an agency problem. When a typical patient goes to the doctor, he has no idea what anything costs. He pays only about 15% of the bill, so if the doctor recommends something he will probably say yes. The doctor gets paid for everything he does, so he has a powerful incentive to perform costly, unnecessary procedures. Besides, he may be socked for damages if he omits a test that a lawyer subsequently convinces a jury might have been useful. The costs are passed on to insurers, who pass them on to employers in the form of higher premiums, who then pass them on to workers in the form of lower pay.

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…Managed care will return. This is the model whereby doctors work for the insurer, which pays them to keep people well. Instead of letting patients go straight to a specialist, managed-care firms like Kaiser Permanente make them see a primary-care doctor first, who will figure out whether the problem is serious. This is crucial. Specialists tend to recommend their own specialism—surgeons advocate surgery, and so on. The lack of a gatekeeper in traditional fee-for-service insurance leads to over-doctoring that is often harmful as well as costly, as that IBM executive discovered.

The Time Paradox

hat tip to Miguel Barbosa at Simoleon Sense:

Let's Have Cap and No Trade

A real good op-ed by David Sokol, CEO of Mid-American, regarding the cap and trade proposal:

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The real hidden catch of the cap-and-trade system, though, is that it will require consumers to pay twice: first for emission allowances and then for the construction of new low- and zero-carbon power plants.
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The solution? Keep the cap and remove trading from the equation: Mandate that the industry, over the same 40-year period, simply limit its emissions to the same levels proposed in the Waxman-Markey bill. This can be accomplished with a clear plan that gives states an option: Either they participate in a cap-and-trade program or they elect an alternative compliance mechanism to reach the same greenhouse gas emission goals by working with their utilities to develop a 40-year program of shutting down aging coal plants, retrofitting plants to capture carbon dioxide if the technology becomes available, and/or building zero-carbon energy plants. More important, the carbon dioxide reductions in this proposal can be achieved while providing adequate time to plan to minimize price shock and economic dislocation. It is the states, through their public utilities commissions -- not the federal government -- that have both the interest and obligation to manage citizens' costs while transitioning to a carbon-free future.

"The Wire": The Men Behind The Scenes

Some argue it is the best TV series ever written- and I would be one of them. "The Wire" was an amazing HBO series dealing with the inner-workings of the Baltimore city. And for me, its writing and directing were in a class of its own. So, I got interested in learning about the leading men behind the scenes, David Simon and Ed Burns, and I loved what they had to say. Below are links to a good summary article as well as two interviews I quickly came across. There is surely plenty more.


The Angriest Man In Television

and then, the interviews...

*Update: PBS interview with David Simon (hat tip to comments)

Interview With David Simon

Slate: One thing that struck me about the show, from the get-go—and this may sound like base flattery: It reminded me of Shakespearean drama for the way that even the villains are humanized. No one is just a bad guy. Even Avon, whom I loathed at the opening of Season 1, I came to like.

Simon: It's funny you should say that, because the portrayals in Deadwood are in the Shakespearean model. On The Sopranos, there's an awful lot of Hamlet and Macbeth in Tony. But the guys we were stealing from in The Wire are the Greeks. In our heads we're writing a Greek tragedy, but instead of the gods being petulant and jealous Olympians hurling lightning bolts down at our protagonists, it's the Postmodern institutions that are the gods. And they are gods. And no one is bigger.

Interview With Ed Burns

HBO
So is there a message that you think people can take away from this year's arc?

BURNS
I think the idea we're trying to bring across is that kids are going to get educated. And that we're going to see where. It's not about kids making bad mistakes and becoming caught in the Criminal Justice system. They don't have an option of choice. We in society have the choices. So you might see a kid who clearly doesn't have a prayer and it will be very apparent why he doesn't have a prayer. It's not about blaming kids. They will survive. They will learn. It's just a question of where.