Canada

pnrj core principles, market failure, public policy , , , , , , , , , , , , , , , , ,

There should be a glut of nurses.

Jan 15 JDN 2459960

It will not be news to most of you that there is a worldwide shortage of healthcare staff, especially nurses and emergency medical technicians (EMTs). I would like you to stop and think about the utterly terrible policy failure this represents. Maybe if enough people do, we can figure out a way to fix it.

It goes without saying—yet bears repeating—that people die when you don’t have enough nurses and EMTs. Indeed, surely a large proportion of the 2.6 million (!) deaths each year from medical errors are attributable to this. It is likely that at least one million lives per year could be saved by fixing this problem worldwide. In the US alone, over 250,000 deaths per year are caused by medical errors; so we’re looking at something like 100,000 lives we could safe each year by removing staffing shortages.

Precisely because these jobs have such high stakes, the mere fact that we would ever see the word “shortage” beside “nurse” or “EMT” was already clear evidence of dramatic policy failure.

This is not like other jobs. A shortage of accountants or baristas or even teachers, while a bad thing, is something that market forces can be expected to correct in time, and it wouldn’t be unreasonable to simply let them do so—meaning, let wages rise on their own until the market is restored to equilibrium. A “shortage” of stockbrokers or corporate lawyers would in fact be a boon to our civilization. But a shortage of nurses or EMTs or firefighters (yes, there are those too!) is a disaster.

Partly this is due to the COVID pandemic, which has been longer and more severe than any but the most pessimistic analysts predicted. But there shortages of nurses before COVID. There should not have been. There should have been a massive glut.

Even if there hadn’t been a shortage of healthcare staff before the pandemic, the fact that there wasn’t a glut was already a problem.

This is what a properly-functioning healthcare policy would look like: Most nurses are bored most of the time. They are widely regarded as overpaid. People go into nursing because it’s a comfortable, easy career with very high pay and usually not very much work. Hospitals spend most of their time with half their beds empty and half of their ambulances parked while the drivers and EMTs sit around drinking coffee and watching football games.

Why? Because healthcare, especially emergency care, involves risk, and the stakes couldn’t be higher. If the number of severely sick people doubles—as in, say, a pandemic—a hospital that usually runs at 98% capacity won’t be able to deal with them. But a hospital that usually runs at 50% capacity will.

COVID exposed to the world what a careful analysis would already have shown: There was not nearly enough redundancy in our healthcare system. We had been optimizing for a narrow-minded, short-sighted notion of “efficiency” over what we really needed, which was resiliency and robustness.

I’d like to compare this to two other types of jobs.

The first is stockbrokers.Set aside for a moment the fact that most of what they do is worthless is not actively detrimental to human society. Suppose that their most adamant boosters are correct and what they do is actually really important and beneficial.

Their experience is almost like what I just said nurses ought to be. They are widely regarded (correctly) as very overpaid. There is never any shortage of them; there are people lining up to be hired. People go into the work not because they care about it or even because they are particularly good at it, but because they know it’s an easy way to make a lot of money.

The one thing that seems to be different from my image may not be as different as it seems. Stockbrokers work long hours, but nobody can really explain why. Frankly most of what they do can be—and has been—successfully automated. Since there simply isn’t that much work for them to do, my guess is that most of the time they spend “working” 60-80 hour weeks is actually not actually working, but sitting around pretending to work. Since most financial forecasters are outperformed by a simple diversified portfolio, the most profitable action for most stock analysts to take most of the time would be nothing.

It may also be that stockbrokers work hard at sales—trying to convince people to buy and sell for bad reasons in order to earn sales commissions. This would at least explain why they work so many hours, though it would make it even harder to believe that what they do benefits society. So if we imagine our “ideal” stockbroker who makes the world a better place, I think they mostly just use a simple algorithm and maybe adjust it every month or two. They make better returns than their peers, but spend 38 hours a week goofing off.

There is a massive glut of stockbrokers. This is what it looks like when a civilization is really optimized to be good at something.

The second is soldiers. Say what you will about them, no one can dispute that their job has stakes of life and death. A lot of people seem to think that the world would be better off without them, but that’s at best only true if everyone got rid of them; if you don’t have soldiers but other countries do, you’re going to be in big trouble. (“We’ll beat our swords into liverwurst / Down by the East Riverside; / But no one wants to be the first!”) So unless and until we can solve that mother of all coordination problems, we need to have soldiers around.

What is life like for a soldier? Well, they don’t seem overpaid; if anything, underpaid. (Maybe some of the officers are overpaid, but clearly not most of the enlisted personnel. Part of the problem there is that “pay grade” is nearly synonymous with “rank”—it’s a primate hierarchy, not a rational wage structure. Then again, so are most industries; the military just makes it more explicit.) But there do seem to be enough of them. Military officials may lament of “shortages” of soldiers, but they never actually seem to want for troops to deploy when they really need them. And if a major war really did start that required all available manpower, the draft could be reinstated and then suddenly they’d have it—the authority to coerce compliance is precisely how you can avoid having a shortage while keeping your workers underpaid. (Russia’s soldier shortage is genuine—something about being utterly outclassed by your enemy’s technological superiority in an obviously pointless imperialistic war seems to hurt your recruiting numbers.)

What is life like for a typical soldier? The answer may surprise you. The overwhelming answer in surveys and interviews (which also fits with the experiences I’ve heard about from friends and family in the military) is that life as a soldier is boring. “All you do is wake up in the morning and push rubbish around camp.” “Bosnia was scary for about 3 months. After that it was boring. That is pretty much day to day life in the military. You are bored.”

This isn’t new, nor even an artifact of not being in any major wars: Union soldiers in the US Civil War had the same complaint. Even in World War I, a typical soldier spent only half the time on the front, and when on the front only saw combat 1/5 of the time. War is boring.

In other words, there is a massive glut of soldiers. Most of them don’t even know what to do with themselves most of the time.

This makes perfect sense. Why? Because an army needs to be resilient. And to be resilient, you must be redundant. If you only had exactly enough soldiers to deploy in a typical engagement, you’d never have enough for a really severe engagement. If on average you had enough, that means you’d spend half the time with too few. And the costs of having too few soldiers are utterly catastrophic.

This is probably an evolutionary outcome, in fact; civilizations may have tried to have “leaner” militaries that didn’t have so much redundancy, and those civilizations were conquered by other civilizations that were more profligate. (This is not to say that we couldn’t afford to cut military spending at all; it’s one thing to have the largest military in the world—I support that, actually—but quite another to have more than the next 10 combined.)

What’s the policy solution here? It’s actually pretty simple.

Pay nurses and EMTs more. A lot more. Whatever it takes to get to the point where we not only have enough, but have so many people lining up to join we don’t even know what to do with them all. If private healthcare firms won’t do it, force them to—or, all the more reason to nationalize healthcare. The stakes are far too high to leave things as they are.

Would this be expensive? Sure.

Removing the shortage of EMTs wouldn’t even be that expensive. There are only about 260,000 EMTs in the US, and they get paid the apallingly low median salary of $36,000. That means we’re currently spending only about $9 billion per year on EMTs. We could double their salaries and double their numbers for only an extra $27 billion—about 0.1% of US GDP.

Nurses would cost more. There are about 5 million nurses in the US, with an average salary of about $78,000, so we’re currently spending about $390 billion a year on nurses. We probably can’t afford to double both salary and staffing. But maybe we could increase both by 20%, costing about an extra $170 billion per year.

Altogether that would cost about $200 billion per year. To save one hundred thousand lives.

That’s $2 million per life saved, or about $40,000 per QALY. The usual estimate for the value of a statistical life is about $10 million, and the usual threshold for a cost-effective medical intervention is $50,000-$100,000 per QALY; so we’re well under both. This isn’t as efficient as buying malaria nets in Africa, but it’s more efficient than plenty of other things we’re spending on. And this isn’t even counting additional benefits of better care that go beyond lives saved.

In fact if we nationalized US healthcare we could get more than these amounts in savings from not wasting our money on profits for insurance and drug companies—simply making the US healthcare system as cost-effective as Canada’s would save $6,000 per American per year, or a whopping $1.9 trillion. At that point we could double the number of nurses and their salaries and still be spending less.

No, it’s not because nurses and doctors are paid much less in Canada than the US. That’s true in some countries, but not Canada. The median salary for nurses in Canada is about $95,500 CAD, which is $71,000 US at current exchange rates. Doctors in Canada can make anywhere from $80,000 to $400,000 CAD, which is $60,000 to $300,000 US. Nor are healthcare outcomes in Canada worse than the US; if anything, they’re better, as Canadians live an average of four years longer than Americans. No, the radical difference in cost—a factor of 2 to 1—between Canada and the US comes from privatization. Privatization is supposed to make things more efficient and lower costs, but it has absolutely not done that in US healthcare.

And if our choice is between spending more money and letting hundreds of thousands or millions of people die every year, that’s no choice at all.

Inequality-adjusted GDP and median income

pnrj critique of neoclassical economics, inequality , , , , , , , , ,

Dec 11 JDN 2459925

There are many problems with GDP as a measure of a nation’s prosperity. For one, GDP ignores natural resources and ecological degradation; so a tree is only counted in GDP once it is cut down. For another, it doesn’t value unpaid work, so caring for a child only increases GDP if you are a paid nanny rather than the child’s parents.

But one of the most obvious problems is the use of an average to evaluate overall prosperity, without considering the level of inequality.

Consider two countries. In Alphania, everyone has an income of about $50,000. In Betavia, 99% of people have an income of $1,000 and 1% have an income of $10 million. What is the per-capita GDP of each country? Alphania’s is $50,000 of course; but Betavia’s is $100,990. Does it really make sense to say that Betavia is a more prosperous country? Maybe it has more wealth overall, but its huge inequality means that it is really not at a high level of development. It honestly sounds like an awful place to live.

A much more sensible measure would be something like median income: How much does a typical person have? In Alphania this is still $50,000; but in Betavia it is only $1,000.

Yet even this leaves out most of the actual distribution; by definition a median is only determined by what is the 50th percentile. We could vary all other incomes a great deal without changing the median.

A better measure would be some sort of inequality-adjusted per-capita GDP, which rescales GDP based on the level of inequality in a country. But we would need a good way of making that adjustment.

I contend that the most sensible way would be to adopt some kind of model of marginal utility of income, and then figure out what income would correspond to the overall average level of utility.

In other words, average over the level of happiness that people in a country get from their income, and then figure out what level of income would correspond to that level of happiness. If we magically gave everyone the same amount of money, how much would they need to get in order for the average happiness in the country to remain the same?

This is clearly going to be less than the average level of income, because marginal utility of income is decreasing; a dollar is not worth as much in real terms to a rich person as it is to a poor person. So if we could somehow redistribute all income evenly while keeping the average the same, that would actually increase overall happiness (though, for many reasons, we can’t simply do that).

For example, suppose that utility of income is logarithmic: U = ln(I).

This means that the marginal utility of an additional dollar is inversely proportional to how many dollars you already have: U'(I) = 1/I.

It also means that a 1% gain or loss in your income feels about the same regardless of how much income you have: ln((1+r)Y) = ln(Y) + ln(1+r). This seems like a quite reasonable, maybe even a bit conservative, assumption; I suspect that losing 1% of your income actually hurts more when you are poor than when you are rich.

Then the inequality adjusted GDP Y is a value such that ln(Y) is equal to the overall average level of utility: E[U] = ln(Y), so Y = exp(E[U]).

This sounds like a very difficult thing to calculate. But fortunately, the distribution of actual income seems to quite closely follow a log-normal distribution. This means that when we take the logarithm of income to get utility, we just get back a very nice, convenient normal distribution!

In fact, it turns out that for a log-normal distribution, the following holds: exp(E[ln(Y)]) = median(Y)

The income which corresponds to the average utility turns out to simply be the median income! We went looking for a better measure than median income, and ended up finding out that median income was the right measure all along.

This wouldn’t hold for most other distributions; and since real-world economies don’t perfectly follow a log-normal distribution, a more precise estimate would need to be adjusted accordingly. But the approximation is quite good for most countries we have good data on, so even for the ones we don’t, median income is likely a very good estimate.

The ranking of countries by median income isn’t radically different from the ranking by per-capita GDP; rich countries are still rich and poor countries are still poor. But it is different enough to matter.

Luxembourg is in 1st place on both lists. Scandinavian countries and the US are in the top 10 in both cases. So it’s fair to say that #ScandinaviaIsBetter for real, and the US really is so rich that our higher inequality doesn’t make our median income lower than the rest of the First World.

But some countries are quite different. Ireland looks quite good in per-capita GDP, but quite bad in median income. This is because a lot of the GDP in Ireland is actually profits by corporations that are only nominally headquartered in Ireland and don’t actually employ very many people there.

The comparison between the US, the UK, and Canada seems particularly instructive. If you look at per-capita GDP PPP, the US looks much richer at $75,000 compared to Canada’s $57,800 (a difference of 29% or 26 log points). But if you look at median personal income, they are nearly equal: $19,300 in the US and $18,600 in Canada (3.7% or 3.7 log points).

On the other hand, in per-capita GDP PPP, the UK looks close to Canada at $55,800 (3.6% or 3.6 lp); but in median income it is dramatically worse, at only $14,800 (26% or 23 lp). So Canada and the UK have similar overall levels of wealth, but life for a typical Canadian is much better than life for a typical Briton because of the higher inequality in Britain. And the US has more wealth than Canada, but it doesn’t meaningfully improve the lifestyle of a typical American relative to a typical Canadian.

The era of the eurodollar is upon us

pnrj current events, futurism, macroeconomics, public policy , , , , , , , , , , ,

Oct 16 JDN 2459869

I happen to be one of those weirdos who liked the game Cyberpunk 2077. It was hardly flawless, and had many unforced errors (like letting you choose your gender, but not making voice type independent from pronouns? That has to be, like, three lines of code to make your game significantly more inclusive). But overall I thought it did a good job of representing a compelling cyberpunk world that is dystopian but not totally hopeless, and had rich, compelling characters, along with reasonably good gameplay. The high level of character customization sets a new standard (aforementioned errors notwithstanding), and I for one appreciate how they pushed the envelope for sexuality in a AAA game.

It’s still not explicit—though I’m sure there are mods for that—but at least you can in fact get naked, and people talk about sex in a realistic way. It’s still weird to me that showing a bare breast or a penis is seen as ‘adult’ in the same way as showing someone’s head blown off (Remind me: Which of the three will nearly everyone have seen from the time they were a baby? Which will at least 50% of children see from birth, guaranteed, and virtually 100% of adults sooner or later? Which can you see on Venus de Milo and David?), but it’s at least some progress in our society toward a healthier relationship with sex.

A few things about the game’s world still struck me as odd, though. Chiefly it has to be the weird alternate history where apparently we have experimental AI and mind-uploading in the 2020s, but… those things are still experimental in the 2070s? So our technological progress was through the roof for the early 2000s, and then just completely plateaued? They should have had Johnny Silverhand’s story take place in something like 2050, not 2023. (You could leave essentially everything else unchanged! V could still have grown up hearing tales of Silverhand’s legendary exploits, because 2050 was 27 years ago in 2077; canonically, V is 28 years old when the game begins. Honestly it makes more sense in other ways: Rogue looks like she’s in her 60s, not her 80s.)

Another weird thing is the currency they use: They call it the “eurodollar”, and the symbol is, as you might expect, €$. When the game first came out, that seemed especially ridiculous, since euros were clearly worth more than dollars and basically always had been.

Well, they aren’t anymore. In fact, euros and dollars are now trading almost exactly at parity, and have been for weeks. CD Projekt Red was right: In the 2020s, the era of the eurodollar is upon us after all.

Of course, we’re unlike to actually merge the two currencies any time soon. (Can you imagine how Republicans would react if such a thing were proposed?) But the weird thing is that we could! It almost is like the two currencies are interchangeable—for the first time in history.

It isn’t so much that the euro is weak; it’s that the dollar is strong. When I first moved to the UK, the pound was trading at about $1.40. It is now trading at $1.10! If it continues dropping as it has, it could even reach parity as well! We might have, for the first time in history, the dollar, the pound, and the euro functioning as one currency. Get the Canadian dollar too (currently much too weak), and we’ll have the Atlantic Union dollar I use in some of my science fiction (I imagine the AU as an expansion of NATO into an economic union that gradually becomes its own government).Then again, the pound is especially weak right now because it plunged after the new prime minister announced an utterly idiotic economic plan. (Conservatives refusing to do basic math and promising that tax cuts would fix everything? Why, it felt like being home again! In all the worst ways.)

This is largely a bad thing. A strong dollar means that the US trade deficit will increase, and also that other countries will have trouble buying our exports. Conversely, with their stronger dollars, Americans will buy more imports from other countries. The combination of these two effects will make inflation worse in other countries (though it could reduce it in the US).

It’s not so bad for me personally, as my husband’s income is largely in dollars while our expenses are in pounds. (My income is in pounds and thus unaffected.) So a strong dollar and a weak pound means our real household income is about £4,000 than it would otherwise have been—which is not a small difference!

In general, the level of currency exchange rates isn’t very important. It’s changes in exchange rates that matter. The changes in relative prices will shift around a lot of economic activity, causing friction both in the US and in its (many) trading partners. Eventually all those changes should result in the exchange rates converging to a new, stable equilibrium; but that can take a long time, and exchange rates can fluctuate remarkably fast. In the meantime, such large shifts in exchange rates are going to cause even more chaos in a world already shaken by the COVID pandemic and the war in Ukraine.