Friday, October 3, 2008

Rotten Economics and Rotten Teeth

I'm working on my 5 hour personal finance course for the upcoming University of Arizona Free Personal Finance website – as I've said before, the last project I will take on for many years with rigid short-term deadlines (For me especially, these constraints really hurt long term and total value maximization). Anyway, I'm on medical and dental costs and insurance, and I'm reviewing the October 11th, 2007, New York Times article, "Boom Times for Dentists, but Not for Teeth". The news is horrible.

Paul Krugman has talked about how over the last generation of Republican policies impoverishing so many families, and creating two Americas, the United States, which used to be the tallest country in the world, is now falling behind more and more countries:

...nothing demonstrates the harsh class distinctions of Britain in the age of Dickens better than the 9-inch height gap between 15-year-old students at Sandhurst, the elite military academy, and their counterparts at the working-class Marine School. The dismal working and living conditions of urban Americans during the Gilded Age were reflected in a 1- 1/2 inch decline in the average height of men born in 1890, compared with those born in 1830. Americans born after 1920 were the first industrial generation to regain preindustrial stature... There is normally a strong association between per capita income and a country’s average height. By that standard, Americans should be taller than Europeans: U.S. per capita G.D.P. is higher than that of any other major economy. But since the middle of the 20th century, something has caused Americans to grow richer without growing significantly taller.

It’s not the population’s changing ethnic mix due to immigration: the stagnation of American heights is clear even if you restrict the comparison to non-Hispanic, native-born whites.

And although the Komlos-Lauderdale paper suggests that growing income and social inequality in America might be one culprit, the remarkable thing is that, as the authors themselves point out, even high-status Americans are falling short: “rich Americans are shorter than rich Western Europeans and poor white Americans are shorter than poor Western Europeans.”

We seem to be left with two main possible explanations of the height gap.

One is that America really has turned into “Fast Food Nation.”

“U.S. children,” write Mr. Komlos and Mr. Lauderdale, “consume more meals prepared outside the home, more fast food rich in fat, high in energy density and low in essential micronutrients, than do European children.” Our reliance on fast food, in turn, may reflect lack of family time because we work too much: U.S. G.D.P. per capita is high partly because employed Americans work many more hours than their European counterparts.

A broader explanation would be that contemporary America is a society that, in a variety of ways, doesn’t take very good care of its children. Recently, Unicef issued a report comparing a number of measures of child well-being in 21 rich countries, including health and safety, family and peer relationships and such things as whether children eat fruit and are physically active. The report put the Netherlands at the top; sure enough, the Dutch are now the world’s tallest people, almost 3 inches taller, on average, than non-Hispanic American whites. The U.S. ended up in 20th place, below Poland, Portugal and Hungary [emphasis added].

Now, we get to add to shorter stature rotting and missing teeth. The Times article states:

With dentists’ fees rising far faster than inflation and more than 100 million people lacking dental insurance, the percentage of Americans with untreated cavities began rising this decade, reversing a half-century trend of improvement in dental health.

Previously unreleased figures from the Centers for Disease Control and Prevention show that in 2003 and 2004, the most recent years with data available, 27 percent of children and 29 percent of adults had cavities going untreated. The level of untreated decay was the highest since the late 1980s and significantly higher than that found in a survey from 1999 to 2002... The lack of dental care is not restricted to the poor and their children, the data shows. Experts on oral health say about 100 million Americans — including many adults who work and have incomes well above the poverty line — are without access to care.

A federal survey shows that 27 percent of adults without insurance saw a dentist in 2004, down from 29 percent in 1996, when dental fees were significantly lower, even after adjusting for inflation. For adults with private insurance, the rate was virtually unchanged, at 57 percent, up from 56 percent. Since 1990, the number of dentists in the United States has been roughly flat, about 150,000 to 160,000, while the population has risen about 22 percent. In addition, more dentists are working part time.

Now here's an important line to note:

Meanwhile, the A.D.A. does not support opening new dental schools or otherwise increasing the number of dentists. The association says it sees no nationwide shortage of dentists, though it acknowledges a shortage in rural areas.

There's some important economics to point out here. In a basically free market that's well functioning you will never have shortages (other than temporarily) because the price will adjust, but you don't want to not be having a shortage because half of the population is not getting needed dental (or medical) care. If you cut the number of dentist in half because the ADA is fighting an increase in dental school capacity, there won't be a shortage in the number of dentists but only because the price will rise so high that half the population won't purchase dental care, or otherwise the population will cut their dental care in half. This is not the way you want to avoid a shortage. How about we train twice as many dentists, see the price (and their wages) drop to like half of what it is now, and have twice as much dental care – that's how I'd like to see there be no shortage of dentists.

So, what should we do?

1) Resist pressure from the dental lobby, and greatly enlarge dental schools. What stops us from doing this? Mostly the Republicans. Wealthy groups, like dentists, are Republicans principle cronies, and big contributors. Republicans are of, by, and for the rich. In addition, as a result of this, and their simple-minded ideology, they are almost always against increased government spending that's not for the rich and other cronies (or that they're not forced to support due to strong political pressure). It takes away from tax cuts for the rich.

2) Fight for universal health and dental care. The externalities, economies of scale, tremendous decrease in families' risk, amelioration of asymmetric information, and decrease in costly complication are enormous. For the vast majority of products a mostly free market is most efficient, but the economics community (real academic economists, not self-proclaimed right wingnuts) has long recognized there are products that are exceptions, where market problems like those I mentioned are too great, and a very strong government role is most efficient. Health insurance is one of those products. Republicans will fight against this as socialized medicine, but they also fought tooth and nail against Medicare for our seniors as socialized medicine. Thank goodness the Democrats defeated them, and you'd be hard pressed to find Americans today who would say Medicare for our seniors was a bad thing; it was horrible socialized medicine and it should be eliminated; seniors should not have medical coverage provided for free by the government, and instead should be left to buy it on their own, if they're lucky enough to have the money, in the free market.

Obviously, this is a very important election. You want us to be a third world country, just keep voting Republican.