Robbing Peter to Pay Paul

When I call for economic understanding by saying that there is no magic money tree, here is what I mean.  When corporations incur added costs, whether it be shoplifting, a utility rate increase, wage increases or higher taxes, they find a way to pass the cost along to their customers, usually as higher prices.  When governments decide to spend more money, they either raise taxes or borrow, leaving the taxpayers to absorb the cost directly or pay the interest now and leave the principle repayment to future generations.  No magic money tree means that the funds must come from somewhere, not out of thin air, and that somewhere is usually from our wallets, directly or indirectly.  The consumer/taxpayer is the bottom of the economic food chain.

As 2013 begins, the Affordable Care Act (ObamaCare) requires manufacturers of medical devices to pay an excise tax, 2.3% of sales.  Besides the possibility of reducing costs by outsourcing to other countries and reducing development budgets, the industry also hints that the added costs will result in a price increase.  As this article points out:  “Recent surveys show that medical technology executives are examining a host of other options that will have negative consequences, including passing along the added costs through price increases.” (Emphasis added)  Those of us who don’t believe in a magic money tree are not at all surprised.

But look at how circular this situation becomes.  The government adds a tax to help offset the cost of healthcare.  The companies pay the tax by raising prices.  Healthcare providers, doctors and hospitals, raise their prices to account for their now higher costs.  Insurance companies raise their premiums or co-pays to account for their now higher costs.  The government uses the tax money to subsidize health insurance that is now more expensive due to the tax itself!  If anything, the cost of the whole system increases due to the added administration associated with paying and collecting this new tax.

In an economy such as ours, this concept of punishing greedy companies with taxes or penalties doesn’t seem to work very well, and why would we even want to punish someone who provides us with a product or service that we want or need?  In general, magic-money-tree thinking leads to a host of unintended consequences.  

As citizens and voters we can solve this, but not until we stop thinking this way ourselves.  This type of logic drives decisions by both parties at all levels.  They tell us that most of a project will be paid for by a government grant, as if that's not our money too.   They try to make us believe that corporations pay taxes by just reducing their profits or paying their CEO less.  They spend as if the bills will never have to be paid, as if, yes there is a magic money tree or secret treasure to make it all right.  

Diet Soda and Depression

I have mentioned before the tendency of journalists and the media to try to get and hold our attention with emotionally charged pictures or stories.  We regularly see news about the results of studies that seem surprising, scary, or shocking, but are usually somewhat meaningless.  They challenge our ability to remain calm and think rationally about the subject.  Here is another example.

“A new study finds that people who drink diet sodas or fruit drinks are more likely to be diagnosed with depression.”  The article continues very responsibly to explain the size and nature of the study and to emphasize that a link does not necessarily mean that drinking diet sodas causes depression, but the headline - Drinking diet soda linked to depression – has us hooked.  (With sugary soft drinks being blamed for obesity - blame the soda, not the person drinking it - our choices are narrowing.)

Thinking critically about it, we know that correlation is not the same as causation.  "Linked to" isn't the same as "caused by."  We may wonder what we are supposed to do with this information – stop drinking diet soda so to avoid depression or start drinking lots of coffee, which the article tells us may have the opposite effect?  I don’t think it works that way.

Later in the article they say, “more research is needed.”  So what was the point?

Why should we even care about these kinds of studies that give preliminary findings, or publicize findings before they are presented for formal review, or rely heavily on self-reporting as opposed to objective observation?  As I pointed out before, we don’t have the time or energy to be worried about everything, so there is nothing really useful about such news.  But it does make for catchy headlines.

Flu Season

Flu season gives the media another excuse to trot out experts to give us advice about how to live.  If we exhibited a little more critical thinking behavior, they might decide that this is not necessary.

Much of critical thinking is pretty simple.  It doesn’t require an understanding of experimental design, statistics or other mathematical concepts.  Mostly it comprises what used to be called common sense or what I call “the rules of the game.”

These rules of the game we have heard often.  They make sense and lead to a happier life.  Despite hearing them over and over, apparently many people ignore them.

Flu season is just one example.  Every year people are advised to get flu shots.  This year, when the outbreak is worse than normal, the call is longer and louder, but it’s not new.  We are also advised to wash our hands more often and to keep them away from our faces.  This article repeats that advice with some very interesting data.  Children who wash their hands regularly miss less school.  “When 40,000 Navy recruits were instructed to wash their hands five times a day, their rate of respiratory infections fell by 45 percent.”  We know we should, but do we?  “Ninety-one percent of Americans say they wash their hands after using a public toilet, but an observational study conducted in the six US airports found that only 26 percent of men and 17 percent of women actually did.”

Once we get through flu season, we will hear from financial experts telling us to "pay yourself first," that is, put aside savings before you start spending.  They will advise us to have an emergency fund and to make a list before going to the store to avoid the temptation of impulse items or unneeded purchases.  They will tell us how much we can save by making our coffee at home or brown bagging instead of buying lunch.  The list is always the same.  The rules of the game don’t change.

In the summer we will be told to use sunscreen.  Before school starts we will hear about the importance of vaccinations and be reminded that rumors about a link between vaccinations and autism are completely untrue.  Don’t forget to see the dentist twice a year and, between visits, to brush and floss.  Eat well and exercise.

The rules of the game don’t change.  They are basic.  We should know them by heart.  If we can’t follow through on these simple, common sense behaviors, how do we expect to grasp and solve more difficult issues like gun violence, education, healthcare, poverty, legalizing drugs, or the national debt?

Genetic Engineering

Genetic engineering is a scary subject.  It summons up images of mutant beings from science fiction movies.  But when it applies to your food it should not be a concern.  Some argue that consumers have a right to know what goes into their food and are requesting that genetically engineered products be labeled as such.  Is this really a push to inform or a push to scare?  Center for Food Safety promotes this concern with general claims of dangers and warns, “Congress has yet to pass a single law intended to manage them responsibly.”  On the other hand, the FDA presented to the House Committee on Science reasons why there is nothing to worry about.  In their conclusion, they emphasize that the current review process “allows us to ensure the safety of new food products and also allow the use of safe, new biotechnology techniques that give manufacturers the ability to produce better products and provide consumers additional choices.”

When dealing with such issues, it is important to deal with facts.  Just as I did with the fiscal cliff posting where I showed graphically how current spending practices would lead to a progressively worse situation, and how this new trend arose only in the last decade; here I want to pass along some reliable information on genetic engineering of the food supply to reinforce the FDA's position.

I recently read Botany for Gardeners by Brian Capon.  It contains this excellent explanation on the topic (pp. 143-144).  Mutations occur naturally within plants.  Sometimes it harms the plant.  Sometimes it has no discernible effect.  Sometimes it is favorable and makes the plant more hardy, flavorful, attractive, or nutritious.  Formerly scientists had to use crossbreeding and other techniques to try to isolate and preserve favorable traits.  It was a slow, hit-or-miss process with only a small fraction of successes.  “The most direct method of obtaining plants with more desirable characteristics would be to directly transfer genes that control these features…thereby avoiding the uncertainty of cross-breeding.”  Although the main concern about genetic engineering is harm to human health, as techniques are perfected, the danger is no more likely than what may happen by traditional crossbreeding.  Use of genetic engineering in the future promises custom-made plants that are more resistant to pathogens and harmful insects, better able to withstand droughts, stronger, more productive and better in nutritional (or medicinal) value.

Time and energy limit the number of things we can be scared of.  Genetic engineering is only one example.  Before changing our habits or lecturing others about dangers based on information from friends, the Internet, interest groups with their funding on the line or TV where scare tactics are routinely used to enhance ratings; doesn’t it make sense to do some research?  Many things we believe to be dangerous are, in fact, quite safe; whereas many of our daily habits are long-term harmful.  Only good information can cure this.  Unfortunately the few sources of such information must compete against the daily onslaught of massaged facts and outright misinformation.

Why Is Color So Important?

This thought about perspective was inspired by recent medical news about the color of pills and by a slightly older story about the color of cars.  Perspective is about distinguishing between what’s important and what’s trivial, hence, living according to real values rather than values imposed by society.  People strong in perspective look past external appearances and tend to adopt a lifestyle based on moderation.  Common examples of poor perspective include the Black Friday stampedes and the accumulation of debt from buying to satisfy our wants and impulses or to impress others.

A key lesson is that appearances are often deceptive when it comes to judging what's really important.  Nevertheless, examples abound showing how people are overly influenced by external factors, in the following cases by color alone.

The first is a health report that came out earlier this week.  Studies show that when the color of medication is changed, there is a greater a tendency for people to stop taking it.  This occurred 27 to 50 percent of the time, and it is not a trivial problem.  “Failure to take a prescribed medication — a behavior known as non-adherence — costs $290 billion annually in additional health complications, according to the New England Healthcare Institute.”  Apparently generic medication, less expensive but identical to the brand name drug, may be manufactured by several companies.  They don’t coordinate with each other on the color, nor do they take great pains to maintain consistency within each company.  People look at their pills and don’t recognize them or are confused by the color.  Over-reliance on visual cues causes them to make poor decisions about continuing medication.

The influence of something as superficial as color extends beyond the health field.  As this article points out, “BuyingAdvice.com [has found] that if a car is not available in the preferred color, 40 percent of drivers will decide to change brands.”  With all the factors involved in deciding which car to buy:  safety, reliability, fuel economy, price, warrantee, insurance costs, and others; isn’t it surprising that 40% would switch brands – Ford instead of Toyota or Kia instead of Subaru – just because they can’t find the color they want?  This is especially surprising since, when sitting inside a car, it’s very difficult to tell what color the car is!  The color is visible only to other people.  It could be ugly green or bright pink and you’d never know it until you got out.

When making major decisions, it's critical to put substantial factors ahead of superficial ones.  Based on these stories alone, color is one of those external factors that wrongly holds considerable sway in decision making.  A good New Year’s resolution might be to try to be less influenced by appearance and other external factors.  Maybe we can start with pills and cars and work our way up to people.