Monday, October 20, 2014

Tough Decisions

In 1967 a British philosopher developed a problem, a kind of thought experiment, called the “Trolley Dilemma.”  Since then it has caused much discussion and spawned several variations.  In it you control a switch that will reroute a trolley from the main track onto a spur track.  The trolley is coming, and ahead on the track are five workmen unaware of its approach.  They will surely be killed.  If you pull the switch the trolley will be diverted and you will save the five lives, but the trolley will hit and kill one other workman on the spur track.  What would you do?

In purely utilitarian terms the right answer is to pull the switch.  The choice between five dying and one dying is a pure mathematical decision.  If you were not there, however, the five would be killed with no one to blame, which is the same as doing nothing.  It is reasonable to assume that pulling the switch is the equivalent of killing the single workman.  One variation, which makes it more interesting, replaces the switch with an innocent bystander and asks if it would be ethical to throw him in front of the trolley to save the five.  This usually gives participants more pause than the more mechanical action of just pulling a switch.  Clearly there is no good answer.  It is a test of values.

Now I digress from the original problem.  Let’s replace the one workman on the spur track with a small tree or rose bush.  Despite the fact that shrubs are living things, it makes the decision much easier.  Even if it was a very rare or a endangered species of rose bush, the problem becomes a no-brainer – you save the people.

As a next step I replace the rose bush with a box of spiders or garter snakes.  These are living animals that benefit us by eating insects, but few would feel squeamish or hesitate to kill the spiders to save the five workmen.  The decision is still simple.

Moving on, I continue the escalation by changing the unaware target from spiders to an ugly, smelly or otherwise unpopular mammal like a rat, mole or skunk.  At this point, or perhaps even at the last stage, some far-out animal rights advocates would object.  They argue that the rat or skunk has exactly the same right to life as a human and the problem has regressed to the original moral choice.  Most of us, though, would not agonize over the choice between killing a rat or skunk vs. allowing five workmen to die – even if it required actually throwing the box of rats rather than just pulling a switch.

At what point then does each of us cross the line?  At what point does the majority cross the line and declare that there is no difference from the original problem?  At what point does the majority allow themselves to be bullied, badgered or worn down, succumbing with indifference to passive acceptance of someone else’s value system?

Do some say it is identical to the original situation if we must balance five human lives against that of a cute bunny, a baby seal or a brown-eyed doe?  How about a puppy or kitten?  Pets can become like part of the family.  We become very attached to them, but by replacing the one workman, a human stranger, in the original problem with our family pet could it ever put the choice into the same ethical category?  (Remember, I wrote previously about a family that tried to refuse entry into a tornado shelter to another family because it would mean putting their dog outside and in danger.)

This is the kind of question I wonder about when I read about people demonstrating to save the life of a dog belonging to an Ebola patient.  The NY Times science reporter tells us that dogs can contract Ebola and can even be carriers without showing symptoms.  Are the demonstrators disregarding this information, or are they making the ethical choice of not pulling the switch because the value the life of a pet equals that of one or more human beings?  I suspect it is neither; they just have good intentions and are going with their instincts.  But is everyone afraid to even question such a decision so as to not appear as cold-hearted and cruel?  Don’t we want those who are protecting our health to try to make the difficult, logical decisions, whatever those are, rather than follow the easy politically popular path?

Friday, October 17, 2014

Gas Prices

There is an eerie silence when the gasoline prices go down.  Most news articles these days concentrate on local changes, but the prices are going down across the county.  According to this source:  “With gas prices in some states already at or slightly below $3 per gallon, the rest of the country could follow suit before the turkey is served on Thanksgiving next month.”  Credit for this is laid at the feet of supply and demand:  a slowing of economic growth in China and other parts of the world along with a greater supply coming from the US due to the use of controversial fracking techniques.  Overall, though, the situation elicits few comments from the media and even less chatter from the community as a whole.

Contrast this with the situation not too long ago when gasoline prices took a dramatic rise.  We heard complaints from friends and neighbors.  There were letters to the editor in local newspapers about the greedy oil companies soaking the little guy to make obscene profits and making accusations of a conspiracy.  News reporters were turning up unusual examples of people trying to decide whether to fill the tank or buy groceries.  Now gas prices are down and you hear hardly a peep out of anyone.  (Is anyone putting aside the extra money, I wonder, to help put food on the table when the prices go back up?)

Here we are right before an election.  If the situation were reversed we would surely hear some politicians telling us about greedy Big Oil getting windfall profits and overpaying their executives, and how, if we elect them, they would institute additional taxes on these profits to give us the feeling of getting a bit of revenge against those who would abuse us in this way.  The greedy speculators in the oil and gas futures market would also get their share of the blame.  Today, with prices moving in the opposite direction, there is only silence.

When the prices go up outside forces have ample opportunity to manipulate us into feeling sorry for ourselves, feeling like victims.  It is such a familiar pattern that many of us now begin to do it to ourselves without any prompting.  But when the prices go down, it’s supply and demand.  Fascinating!

Monday, October 13, 2014

Power of Perspective

Here comes a report of another “new study” that tells us what most of us already know, that happiness depends on expectations.  It was published in the “Proceedings of the National Academy of Sciences of the United States of America.”  The researchers wondered what influenced happiness and how a person’s happiness was influenced by life events.  In a similar way many people wondered how Robin Williams could have been depressed enough to commit suicide given that he was rich and famous and seemed to have everything anyone could want.

In a brief summary NBC reported:  “In a new study, researchers found that it didn't matter so much whether things were going well. It mattered whether they were going better than expected.”  The conclusion is very defensible, with excellent experimental design, based on MRI scans of 26 people and replicated in a smartphone survey of over 18,000 subjects.  The primary focus of the research was a better understanding and treatment of mood disorders rather than assessing happiness, but the implications of these findings are very interesting.

Although most of us already know this, it’s more on a subconscious level.  We seem to be obsessed with building high expectations for ourselves and being disappointed when we are let down by reality.  The two most overused words today are awesome and amazing.  Everything is described as awesome or amazing.  We hear it in advertising, news reports and casual conversation.  As one linguist pointed out in a discussion of changes to the English language, “Awesome used to describe the Taj Mahal; now it’s free parking downtown on Thursday nights.”  Do you see how we kid each other and ourselves by overbuilding expectations? 

Hype keeps growing in our society to the point that you don’t have to wait for a politician or adman to come along.  Just look to your friends, your kids, your Facebook contacts.  We act like brides before the big day – everything has to be perfect.  We act like kids at Christmas, tearing open presents and soon setting them aside to tear open the next.  Our world of toys, games, gadgets, special effects, gets more and more sophisticated, technical and intricate, but we can’t wait for the next iPhone or other product that will be even better.

This doesn’t necessarily mean that high expectations are always bad, but they must be realistic.  (And don't confuse high expectations with high standards.)  Sometimes what we already have is OK, often it’s better than OK but we are too busy looking ahead to the next big thing to appreciate it.  Every experience for our whole life is not guaranteed to be awesome or amazing.  When we unconsciously make such demands, we are bound to be less happy than we could be.

Friday, October 10, 2014

Retirement Crisis 2

This article reinforces many of the points I have been making about discipline, responsibility, media hype and how if we don’t take care of ourselves, help will be inflicted upon us.

In America we don’t have any problems because very soon each one becomes a crisis.  The news media can’t keep us interested in stories unless they are cute, outrageous, scary or otherwise emotionally engaging.  Instead of straight news we get pets or wild animals in unusual situations, freaks, celebrity gossip, natural disasters, epidemics and the crisis of the week.

This story is about the retirement crisis.  It features an interview with a US Senator from Oregon asking him “why he is worried about the ability of Americans to save for a successful retirement and what he plans to do about it.”  He considers his concern that not enough people are saving for retirement as a call to action.  He wants to make it easier for them.  Apparently, spending less money than you earn is too difficult for us to figure out, so the government must come to the rescue.

The basic problem is that the IRA was “intended for a typical person,” but it’s primarily well-off people taking advantage of it.  With the decline in traditional pension plans, typical people are not saving enough.  This is all old news.  His idea, based on a law in his home state is to require employers that don’t offer a pension or 401(k) plan to withhold a set percentage from each paycheck as an automatic IRA contribution.  Participation is not mandatory for employees.  This, of course, is something employees could do for themselves, on-line with their bank requiring very little effort if they were interested.

On one hand he says that “it seems to be popular” in Oregon.  He goes on, however, to bemoan the low level of retirement savings in his state.  “If steps aren't taken to make (saving) easier, this country will find a lot of people hurting and there will be real consequences.”  Gee, unsatisfactory behavior in the dimension of discipline has consequences – what a revelation!

He is a Democrat but expects bi-partisan support.  That also is not surprising since the program is remarkably similar to a Republican plan a decade ago to partially privatize social security by assigning a portion of FICA tax to an individual account.  No doubt steps will be taken and hopefully a few more people will save a few more dollars for retirement.  Will “the crisis” be diverted? – Not likely.  Government programs can’t fix individual failings.  Behavior has consequences and further programs will doubtless be proposed to protect people from the consequences of their own actions in order to get reelected.

Monday, October 6, 2014

Adverse Selection

When I talk about economic understanding, I mean the ability to trace large economic or business decisions back to how they affect you and me as individual consumers and taxpayers.  There is no free lunch, no magic money tree; every time money is spent, it comes out of someone’s wallet.

This understanding seems especially difficult when it comes to insurance.  People are led to believe that they can pay small insurance premiums and receive larger returns.  AARP advertises that their Medicare supplement insurance “could save you thousands of out-of-pocket costs.”  How likely is that to happen when every insurance company must collect in total more than they pay out just to be able to pay their employees, to buy their office equipment, and to pay their rent and utility bills?  If their average customer saved thousands, where does that money come from?  Sales pitches like that drive the misunderstanding.

To add to the confusion we are led to believe that insurance availability is synonymous with healthcare availability, that insurance quality and affordability are synonymous with healthcare quality and affordability.  When it doesn’t work out that way, politicians and the press join in mutual head scratching.

So when someone comes up with the idea of adding individual choice to healthcare and health insurance, on first blush it sounds like a good idea.  Why would a man or elderly woman want to pay for pregnancy coverage?  Could I sign a contract with my doctor promising not to sue in return for a lower bill?  These and other similar programs could keep my premiums lower and really save me thousands.  Unfortunately the law will not allow this nor would it work in the insurance business because of a concept called adverse selection.

Adverse selection occurs when a product or service is selected by only a certain group of people who offer the worst return for the company.”  As a simple example, I had a work colleague whose wife became pregnant late in the year, just at the time when everyone at the company was selecting coverage for the following year.  He said that he was dropping the lower-cost high deductible plan and was willing to pay the higher premiums for the next year because of the anticipated expenses.  The next year he intended to switch back – good for him, bad for the insurance carrier.  If many people take similar actions, the insurance company must raise premiums or go out of business.  Likewise, if healthy people are allowed to go without insurance and pay their own doctor bills, insurers would not be able to collect premiums from them.  Since the insurance companies simply cannot afford to pay out more than they collect on a regular basis, there must be enough people paying in more than they are getting out to support the company’s expenses.  Forget about those exorbitant profits for “big insurance”; this is true even for a non-profit company.

For a long time companies would not insure people with pre-existing conditions.  Why?  It was their way to limit the pool of customers who were collecting more than they were paying.  As they are forced to accept them as customers, the increased cost is spread over all their customers.  The insurers can no longer weasel out of paying, but we don’t want them to go out of business either – or no one would be covered.

This is the situation we find ourselves in.  Because everyone is required to have insurance, overall health is a public concern.  Everyone’s health is everybody else’s business.  Those who don’t try to take care of themselves are a financial burden on the rest who are forced to subsidize them.  This is neither good nor bad; it just is the way things are.  People need healthcare, and people get healthcare, but the money doesn’t grow on trees – even if it comes from government subsidies.  We need economic understanding about insurance to see what is happening and to anticipate the benefits and ramifications of future proposals.

The next time you hear those ads for term life insurance that assure you that no physical exam or health questionnaire is necessary, think about what that means in terms of costs.  Such a deal will be especially attractive to those who want to avoid a physical exam.  As a healthy person with an average life expectancy, you would be required to subsidize them through your higher premiums.  You can likely find a cheaper policy to protect you from an unforeseen tragedy, if it is one that protects the company against adverse selection by asking about your health first.  That’s the way it works.