Tag Archives: econ

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“Indeed, ransom payments are the main venture of real-life Somali pirates, unlike the small-scale robberies of the initial Somali piracy narrative. Ransoms have increased in value from under a million dollars on average per year in 2005 to an average payment of $5 million in 2011 (although the average dropped in 2012 to $4 million). As mentioned repeatedly in the film, the hijackers are rarely the sole profiteers from a hostage taking scenario. A band of pirates is usually headed by a kingpin who organizes the mother ship and negotiators, who have higher education and can command up to 5 percent of the payout. Pirate crews need to be nearly proportionate to crew members on the commercial vessels being hijacked so the split generally has to be divided between a lot of people. According to the United Nations, financiers of planned hijackings can buy shares of attempts, and the typical cost of an attempt is about $50,000 dollars. Thus, the payout needs to cover pirate crew, the kingpin’s costs, and the original outlay, as well a high return to investors (investors typically claim at minimum 30 percent of the payout). The U.N. argues that piracy in Somalia in the past garnered public support because of the perception of its redistributive nature. However, this support has recently waned, hinting at the fact that communities are not really seeing the benefits of piracy. As Somalia reconstructs and attracts more legitimate business investors, there may be less support for an activity that increases risk and negative perceptions of the business environment.”

– http://www.brookings.edu/blogs/africa-in-focus/posts/2013/10/18-captain-phillips-east-africa-somalia-sy

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A doctor should get paid if the patient is healthy, not the other way around. This might sound strange, but actually, it’s what you and I do already. We pay insurance and we expect that our insurance will cover whatever comes up.However, it is when insurers pay doctors that doctors are paid for service, not health.

With principle in mind, I came up with this thought experiment:

“Imagine that there is one disease in the world and doctors are able to cure this disease with 97% effectiveness. Furthermore, the custom is to pay for health, not for service. How would a doctor make a living?

She would collect an annual flat fee from her patients. If in any given year, she expects only a certain number of them to get this disease, she charges accordingly — enough to cover the cost of treatment, damages from botched treatments, her own salary and that of assistants, and a cushion in case there is an unexpectedly high number of outbreaks this year.”

What is the doctor doing here? Well, she’s running an insurance company! She is both a provider of medical care (a doctor) and the one who takes on the task of spreading out health risk among a pool of people (insurance).

Unlike our current system, this system works because the provider and the insurance company are one and the same. The current system features an adversarial relationship in which insurance companies try to underpay providers and providers try to get their maximum payment by needlessly tacking on procedures, with nobody incentivized to lower costs. In this ideal system, the incentive for reducing costs is internalized in the doctor/insurer. A doctor who behaves inefficiently will eat into his own profits.

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– https://medium.com/armchair-economics/eba04c21d410

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“Purely for the sake of health insurance, people stay in jobs they aren’t suited to—a phenomenon that economists call “job lock.” “With the new law, job lock goes away,” Arensmeyer said. “Anyone who wants to start a business can do so independent of the health-care costs.” Studies show that people who are freed from job lock (for instance, when they start qualifying for Medicare) are more likely to undertake something entrepreneurial, and one recent study projects that Obamacare could enable 1.5 million people to become self-employed.”

– http://www.newyorker.com/talk/financial/2013/10/14/131014ta_talk_surowiecki

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Beer is what economists call an elastic good; the more it costs, the less of it people buy. But at Oktoberfest, Germany’s debaucherous annual beer festival in Munich, the rule doesn’t exactly hold. In fact, it gets flipped on its head.

When this year’s beer festival kicks off on Saturday, more than 7 million beer drinkers will gather to drink some 15 million liter glasses. If they are sober enough, they will notice that their lagers, ales and stouts cost more than they did last year.

As is the case almost every year, the price of beer at the Oktoberfest has risen faster than inflation, according to UniCredit Research’s Oktoberfest 2013 report. The average beer at this year’s festival will cost €9.66 ($13)—3.6% more than it did last year. 3 Considering that inflation in Germany is currently hovering somewhere closer to 1.5%, festival goers should be outraged. And yet, like they have virtually every year before this, they will buy and drink more beer per head than they did the year before.

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– http://qz.com/125940/the-more-expensive-oktoberfest-beer-gets-to-more-beer-oktoberfest-goers-drink/

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