Source: http://smallparty.org/yoram/classes/health/
Timestamp: 2019-04-18 12:56:00+00:00

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MTW 3-4pm in Maxey 313, or by request. I will also try to have informal "office hours" in the Prentiss dining hall at 6pm on Tuesdays.
Taught Fall Semester of 2004 at Whitman College; note that this is an archive page and that some links may not work.
Note that some of the readings below link to restricted access websites such as JSTOR. Whitman folks should be able to access these from any computer on campus, or from any computer off campus once properly configured with the Whitman proxy server.
Monday (Part II): Refresher on consumer preferences and utility functions; here are some class notes (.pdf). If you could use a refresher on calculus and derivatives, try this excerpt (.pdf) from some of my class notes.
Here is Problem Set #1, on calculus, cost-minimization, and supply curves. You do not have to turn in the homework, or even do the homework, but you should expect similar problems on the exam. I'm happy to talk with you about the problem set; you can also try to make sense of the answer key.
Monday (Part I): Uncertainty and certainty equivalence. Here are some lecture notes.
This article basically started the field of health economics.
Kenneth Arrow, still alive and kicking at Stanford, shared the 1972 Nobel prize in economics (with John Hicks, a.k.a. Sir John "Hicksian demand curve" Hicks) "for their pioneering contributions to general economic equilibrium theory and welfare theory." The press releases on the Nobel prize website (linked above) are worth a read to get a sense of economic history &etc. Just about anybody who's anybody in economics has won the Nobel prize (which makes some folks wonder if they should stop giving it out or turn it into a prize for social sciences more broadly).
Do pay special attention to the material on pp. 941-943 about the Fundamental Welfare Theorems (which Arrow calls the Optimality Theorems). This is what won Arrow a share of the 1972 Nobel prize, and it also won Gerard Debreu (who worked both independently and in collaboration with Arrow) the 1983 Nobel prize in economics "for having incorporated new analytical methods into economic theory and for his rigorous reformulation of the theory of general equilibrium", and I'll do my best to stop you from graduating if you don't internalize it.
Also pay special attention to the potential political implications of Arrow's article. Consider the year of publication (1963) and think about what was happening in U.S. politics around that time.
Wednesday (Part II): Dennis S. Lees and Robert G. Rice, "Uncertainty and the Welfare Economics of Medical Care: Comment", The American Economic Review, Vol. 55, No. 1/2. (Mar. 1965), pp. 140-154. And: Kenneth J. Arrow, "Uncertainty and the Welfare Economics of Medical Care: Reply (The Implications of Transaction Costs and Adjustment Lags)", The American Economic Review, Vol. 55, No. 1/2. (Mar. 1965), pp. 154-158. For the Lees and Rice article, you should skim sections II and III, with a goal of getting the flavor of their argument. The rest of it, and Arrow�s response, make pretty straight-forward reading; during your reading you should think about the political implications of what the authors are writing.
Monday (Part I): Moral hazard and the prisoners' dilemma.
Monday (Part II): Mark V. Pauly, "The Economics of Moral Hazard: Comment", The American Economic Review, Vol. 58, No. 3, Part 1. (Jun. 1968), pp. 531-537. And: Kenneth J. Arrow, "The Economics of Moral Hazard: Further Comment", The American Economic Review, Vol. 58, No. 3, Part 1. (Jun., 1968), pp. 537-539.
Here is Problem Set #2 on expected value and insurance. You do not have to turn in the homework, or even do the homework, but you should expect similar problems on the exam. I'm happy to talk with you about the problem set; you can also try to make sense of the answer key.
Monday: George A. Akerlof, "The Market for "Lemons": Quality Uncertainty and the Market Mechanism", The Quarterly Journal of Economics, Vol. 84, No. 3. (Aug., 1970), pp. 488-500. (Do not get bogged down in the mathematical example that Akerlof does; instead, I recommend the example on p. 190 of the textbook.) Akerlof shared the 2001 Nobel Prize in economics (with A. Michael Spence and Joseph E. Stiglitz) "for their analyses of markets with asymmetric information"; the Nobel committee calls Akerlof's Lemons paper "the single most important study in the literature on economics of information". A historical side note: Akerlof's paper was rejected three times before it was finally published by the QJE. For details and other stories, read Joshua S. Gans and George B. Shepherd, "How Are the Mighty Fallen: Rejected Classic Articles by Leading Economists", The Journal of Economic Perspectives, Vol. 8, No. 1. (Winter, 1994), pp. 165-179.
Here is Problem Set #3 on demand curves. You do not have to turn in the homework, or even do the homework, but you should expect similar problems on the exam. I'm happy to talk with you about the problem set; you can also try to make sense of the answer key.
Wednesday: Michael Rothschild and Joseph Stiglitz, "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information", The Quarterly Journal of Economics, Vol. 90, No. 4. (Nov., 1976), pp. 629-649. Stiglitz shared the 2001 Nobel Prize in economics (with George A. Akerlof and A. Michael Spence) "for their analyses of markets with asymmetric information". Rothschild did not get a part of the Nobel prize, but he did (like me) go to Reed College. [Note: This article is difficult. Here�s what you should do with it: First, read sections I.1 through I.5; pay particular attention to the definition of equilibrium in I.4. Throughout, you should focus on the ideas, but if the math makes sense then so much the better. (It should all be pretty familiar, just with different variables than you�re used to.) Next, read the first paragraph of section II, the one dealing with the three principal conclusions. Finally, having examined the set-up and the punch line, do your best to understand I.6, which is the heart of the article. We�ll talk about this a bunch in class, so don�t drive yourself to distraction over it.
Monday (Part I): Amos Tversky and Daniel Kahneman, "The Framing of Decisions and the Psychology of Choice", Science, New Series, Vol. 211, Issue 4481 (Jan. 30, 1981), pp. 453-458. This article is available from JSTOR, but only from the computers by the Penrose reserve desk. I have hard copies for anyone who needs one.
Monday (Part II): Matthew Rabin and Richard H. Thaler, "Anomalies: Risk Aversion", Journal of Economic Perspectives, Vol. 15, No. 1 (Winter, 2001), pp. 219-232. This is a fabulous article; it is not yet available on JSTOR, but I have placed a PDF in the Course Documents section of Blackboard.
These two articles fit into a general theme that was expressed nicely by Mark J. Machina (in a difficult optional reading, Choice Under Uncertainty: Problems Solved and Unsolved, Journal of Economic Perspectives, Vol. 1, No. 1 (Summer, 1987), pp. 121-154): "Fifteen years ago [in 1972], the theory of choice under uncertainty could be considered one of the 'success stories' of economic analysis: it rested on solid axiomatic foundations, it had seen important breakthroughs in the analytics of risk, risk aversion, and their applications to economic issues, and it stood ready to provide the theoretical underpinnings for the newly emerging 'information revolution' in economics. Today choice under uncertainty is a field in flux: the standard theory is being challenged on several grounds from both within and outside economics."
Kahneman (a psychologist!) shared the 2002 Nobel Prize in economics "for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty". Tversky almost certainly would have shared in the prize had he not died in 1996. (Nobel prizes are not awared posthumously.) Instead, Kahneman shared the Nobel prize with Vernon L. Smith, who won "for having established laboratory experiments as a tool in empirical economic analysis, especially in the study of alternative market mechanisms."
The semi-regular "Anomalies" column in the Journal of Economic Perspectives is sort of like the X-Files for economics. This particular column is based largely on the following article, which is an optional reading: Matthew Rabin, Risk Aversion and Expected-Utility Theory: A Calibration Theorem, Econometrica, Vol. 68, No. 5 (Sep., 2000), pp. 1281-1292. Another optional reading (I like the Science article better) is Daniel Kahneman, Jack L. Knetsch, and Richard H. Thaler, Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias, Journal of Economic Perspectives, Vol. 5, No. 1 (Winter, 1991), pp. 193-206.
A side comment on the Allais paradox: note that Maurice Allais, who won the 1988 Nobel Prize in economics "for his pioneering contributions to the theory of markets and efficient utilization of resources", was also responsible for an ongoing astronomical puzzle known as the Allais Effect. See An Invisible Hand?, The Economist, August 19, 2004.
Wednesday: We'll discuss the reading from John A. Nyman, The Theory of Demand for Health Insurance (Stanford Univ. Press, 2003). You can pick up a copy outside my door (Maxey 313) if you didn't get the handout in class. The first chapter in the reading (chapter 2) provides an excellent overview of the conventional approach to insurance, so it should be a pretty quick read; pay particular attention to the anomalies discussed at the end of the chapter. The second chapter in the reading (chapter 3) is just there for you to skim so that you can see what a cutting-edge/alternative approach to insurance theory looks like.
Question: What anomalies does Nyman identify and how serious of a threat do you think they pose to conventional theory?
Question: On another heretical (but otherwise unrelated) issue, Victor R. Fuchs, one of the giants in the field of health economics, has this to say on p. 135 of Who Shall Live? Health, Economics, and Social Choice (expanded edition, World Scientific: 1998): "It should be noted that although major-risk [i.e., catastrophic] insurance in various forms is now available from private insurance companies, the demand for it is less than overwhelming. If major-risk insurance is really what people desire in the way of medical care coverage, why don't they buy it now? And why do union leaders and representatives of other groups seek more coverage? I believe one reason is because people want an easy, convenient, systematic way of paying for medical care. It is a great mistake to view the purchase of health insurance as simply the result of the desire to avoid risk." What do you make of this argument?
Today (Wednesday, October 13) is the last day to withdraw from classes or the College without record.
Monday: Pharmaceuticals (class presentations): Keith, Laura B., Laura M.
Today (Monday, November 8) is the last day to withdraw from classes or the College with W grades; today is also the close of the P-D-F registration period.
Wednesday: Class visit from Sarah Michelson, Whitman alum who worked at Amgen!
Wednesday: Katie's presentation; class feedback; class visit from Cindy Waring to discuss Whitman's health care policy.
Monday: Social Security and Medicare overview.
Wednesday: Topic #2 (Laura M/Suraya v. Bill/Derek on Wednesday, December 1): Resolved, that the United States should adopt the Kerry/Edwards plan for catastrophic coverage as a step towards a government-centered health care system such as Canada�s single-payer system.
Monday: Debates #3 (Grant/Keith v. Julia/Shawnee on Monday, December 6): Resolved, that the United States should adopt the Bush/Cheney plan for Medical Savings Accounts (MSAs) as a step towards an individual-centered health care system.
Wednesday: Debate #4 (Spencer/Andrew v. Kathryn/Will on Wednesday, December 8): Resolved, that the United States should make prescription drugs significantly more affordable for third-world countries by changing patent laws, international treaties, and/or providing subsidies.
Topic #1 (Laura B/Jesse v. Quincy/Rusty on Monday, November 29): Resolved, that the state of Washington prohibit smoking inside buildings and vehicles open to the public and places of employment.
Topic #5 (Brett/Katie v. Jill/Jeremy on Monday, December 13 at 9am): Resolved, that the United States should take steps to significantly reduce the rate of growth of Medicare spending.
By the beginning of week 3: Pick a topic.
By the beginning of week 4: Complete background reading and other groundwork and track down secondary readings from the library/Summit/etc as necessary.
By the beginning of week 5: Complete secondary readings, write your anotated bibliography, and draft the outline of your presentation.
By the beginning of week 6: Finish the outline of your presentation, determine the readings you�ll assign, and meet with me to discuss your plan.
By the beginning of week 7: Put the finishing touches on everything and be ready to go!
Below are some ideas and leads in the area of pharmaceuticals; I'm sure there are lots that I'm leaving out. Pick a topic that looks interesting to you and then email me to let me know what it is. First come, first served.
Pharmaceutical pricing in the developed world. Here's a curious fact for you: it turns out that when brand-name prescription drugs go off-patent, meaning that other companies can make generic versions, the company making the brand-name drug often raises its price. What's going on there? [Spencer] And while we're at it: Are drugs really cheaper in Canada or Europe than in the U.S.? [Jill] And how do HMOs use drug formularies to bargain with manufacturers? (For that matter, how do HMOs decide which drugs to cover?) [Jeremy] And how does the CPI (Consumer Price Index, a measure of inflation) deal with prescription drugs? [Brett] Two good articles to start out with (both in the Course Documents section of Blackboard) are (1) Ernst R. Berndt, "Pharmaceuticals in U.S. Health Care: Determinants of Quantity and Price", Journal of Economic Perspectives, 16(4):45-66 (2002) and (2) Nancy T. Gallini, "The Economics of Patents: Lessons from Recent U.S. Patent Reform", Journal of Economic Perspectives, 16(2):131-154 (2002).
Topic #2 (Laura M/Suraya v. Bill/Derek on Wednesday, December 1): Resolved, that the United States should adopt the Kerry/Edwards plan for catastrophic coverage as a step towards a government-centered health care system such as Canada�s single-payer system.
Topic #3 (Grant/Keith v. Julia/Shawnee on Monday, December 6): Resolved, that the United States should adopt the Bush/Cheney plan for Medical Savings Accounts (MSAs) as a step towards an individual-centered health care system.
Topic #4 (Spencer/Andrew v. Kathryn/Will on Wednesday, December 8): Resolved, that the United States should make prescription drugs significantly more affordable for third-world countries by changing patent laws, international treaties, and/or providing subsidies.
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