# Do hospitals make you sicker?

Selection bias is often a very destructive force when trying to determine what works and what doesn’t, it’s often impossible to evaluate if programmes are a success or not unless you’re under something extreme like a totalitarian regime.

Let’s take hospitalization for instance; if you were to ask people coming out of the hospital how their health status was, it would probably be worse for people coming out of the hospital rather than randomly selected people from the population.

So let’s assign some simple terms here then.  First let’s have the treatment dummy:

So its 0 if they don’t get treated and 1 if they do get treated. Then we observe the actual outcome (health status) for each individual with Y.

So to actually measure how much of an effect treatment has we need to compare people receiving treatment to those not receiving it.

Yet the world presents problems since what we actually observe in the real world is:

So there is no one number that represents what actually happens. We can measure the, the average effect of treatment on the treated (ATT), average effect of treatment on the untreated (ATU) or the average treatment effect (ATE).

In public institutions there is this top down selection problem and the more private an institution is the more bias comes from self-selection.

The ATT can tell us the effect of going to the hospital on the people who went to the hospital. The first part of the equation is the observed part, where we measure the health status of individuals who went to the hospital had they went to the hospital. The second part is unobserved because it measures the potential health status of patients who went to the hospital had they not gone to the hospital.

ATT can show us how much people gain from going to the hospital. In the real world private enterprises are much more likely to survive if people notice that there is a positive effect and so the market eliminates a low output hospital. A government hospital on the other hand might have trouble eliminating waste because it will receive customers who might not necessarily think the hospital is any good but will still go just because it is free.

The ATU tells us the expected effect of going to the hospital on someone who did not go to the hospital. The unobserved portion is the effect of the hospital on those who did not go. Second part which we observe is the effect of the hospital on those who went to the hospital.

So it seems pretty obvious that in the real world ATU and ATT are very close to impossible to measure accurately. However what we can measure accurately is the average treatment effect. This is represented by:

To accurately measure this we must make sure to apply a RCT (randomized control trial), in other words randomly allocate if people will go to the hospital or not, and here a paradox arises. We can understand if something works if we randomly allocate it, but if we randomly allocate it we are not maximizing the use of the hospital since we are sending in healthy people. Yet if we don’t randomly allocate it we cannot observe if the hospital is working.

This also is the case with control areas if we decide to do something differently in one country/state/city and leave the rest untouched we can then compare them to see if the area where we applied the new method is better off. So what’s the next step? If they are better off then we mass produce this method to the control areas and we can no longer see if it’s working(think long term effects), and if we don’t mass produce it then those control areas are not benefiting from this new method that could be improving their standard of living.

So the paradox here is between knowing something works versus making it work for everyone. Whether we apply a randomized control trial or use control groups, chances are we are not helping out the best we can, and if we do not apply these methods then we are ignorant as to whether the program is helping people at that specific period in time. To properly understand treatment effects we need a sacrificial lamb to exist. Though what’s generally done is to assume that if something worked in the past, it will keep doing so.

# Vegetarians! An argument i’ve never understood…

Every once in awhile I run into people who tell me they don’t eat meat. Being an institutionalized meat eater the natural question that I ask is “why”. From there the answers can range from dietary to religious reasons, but every once in awhile I get the “because I care about animals” answer. Here, a moral dilemma arises, but not the obvious one, the dilemma is, do I want these animals to be wiped out from the planet or do I want to eat them?

The fact is that eating animals is the best way to save them, if Panda’s were the tastiest animals on earth, a whole industry would emerge that would help them survive. I promise anyone that while chickens taste good, they will never be extinct. Evolution failed before and now it fails once again, the best way for all animals to survive is to evolve into tastier versions of themselves.  Do chickens or cows really have a shot at surviving in the wild? It’s very likely that if we stop protecting them, they will be wiped out very quickly by bigger predators. We value productiveness in our economy so the choice is between making animals do manual labour or eating them.

# The Fat tax!Should we punish individual freedom?

If you haven’t heard yet Denmark started the world’s first so called “fat tax”. Read up on it here . From a business point of view, this is a crippling approach, since the extra cost could mean it would be more profitable to produce in another country and import it back to Denmark. Even though the ERM II mechanism is present, there is still a conversion cost which makes the tax more viable. But if Denmark does eventually adopt the Euro, it would probably not be sustainable any longer(though perhaps by that time there will be further integration which will negate any loss in one countries trade deficit).

But the more interesting part is… does it make sense on a moral perspective? Depends on your point of view really… are you the kind of person who waits for his friends? or would you leave them behind if they slow you down? Assume the first option, how different is a “friend” from someone unknown to you, someone from the same country? I for instance don’t have much sense of nationalism and i don’t feel particularly closer to any one from my country of origin. So no i would not want to pay extra in taxes to accommodate health care just so someone will else can exercise their freedom to eat, the fact is, their freedom is weighing down on my wallet, and with less money, i have less options, and consequently my own individual freedom is  constrained.

I am not more sympathetic to someone with a choice to do something than i am to someone who has not, like a poverty stricken child just because the latter is not born or inhabiting the same km squared land(measured not even by proximity to my home, i might be living closer to another nationality than this person).

In fact you gotta punish the reckless behavior in some way, even if this is not the right way, it represents a new framework for thinking about how to stop this projection, half the US population will be obese by 2030. That’s 65 million more obese people in the US, additionally there will be 11 million more in Britain.

Being fat isn’t cheap either, although its not a very conclusive econometric study, this one, absenteeism could be costing about 1% of US GDP per year. If this effect were true, it would be much smaller in Denmark and Britain, but perhaps its much more appropriate for Denmark to apply it because poverty isn’t nearly as big a problem there(though GNI per capita is higher in the US, inequality is too, which leaves more people with less flexibility in their choices).

Using weight to adjust prices isn’t a new thing, we probably already have the infrastructure to do it, though only the ballsy RyanAir dared do this before by having weight based fees. In any case here’s a link arguing that its dystopian if your interested in reading more.

So whats the final note? well for me Taxing those who are going to use a higher proportion of healthcare makes sense. But the method employed is not very efficient because it creates this import advantage. Using guidelines which you can find here, its easy to just tax fat people directly. Taxing fat people directly for being fat is more efficient than taxing their food since if someone can get away with eating fatty foods(by keeping a balanced lifestyle, or winning the genetic lottery) why should they be punished? Of course people who are genetically fat, would be exempt again… they never had a choice.

# Life Expectancy Bump or Peak?

I keep reading about the peak of Life Expectancy in the US… catch up here. This is ridiculous phrasing, Life Expectancy hasn’t Peaked, there is merely a bump in the road.

Why has it decreased? People are eating unhealthy food.

Why are they eating unhealthy food? Because its cheap and they can’t afford more luxurious dining.

Why can’t they afford it? Because they are poor.

Why are they poor? Because real wages have stagnated

Why have they stagnated? Increased corporate profitability has not been shared equally.

What can we do? When capitalism fails, the big guns come in, Government must act. Measures to tackle inequality must be taken. Chile’s concept of “Unidad De Fomento” must be adopted, indexed units of account, are the key to protecting the consumer from the “money illusion”. Read up on it here. It is the most innovative way to keep purchasing power constant.