Wednesday, August 31, 2016

On EpiPens

Ever since an unfortunate encounter with some smoked salmon imported from China, I have been buying EpiPens for 10 years.  Fortunately the state health plan has shielded me from the tremendous price increases that Mylan has been imposing, now up to $600 for a two-pack.

Most of the discussions in the mass media have been of the predictable shame-shame-on-you variety.   Scolding pharma is a good way to vent, but does it really get to the heart of the issue?  Wouldn't any company raise prices 600% if they could get away with it?  I do not normally pull items from other economics blogs, but this article from Slate Star Codex that is featured today on Marginal Revolution is both informative and (in parts) hilarious.

Here are the informative parts:
1) A number of companies have developed EpiPen substitutes but they keep getting rejected by the FDA.  In contract there are eight competing EpiPen-like products in the EU.
2) There is an approved substitute called Adrenaclick but most doctors are unaware of it and keep prescribing the EpiPen.
3) Mylan spends heavily on lobbying to keep things the way they are.

Here is the funny part:

Imagine that the government creates the Furniture and Desk Association, an agency which declares that only IKEA is allowed to sell chairs. IKEA responds by charging $300 per chair. Other companies try to sell stools or sofas, but get bogged down for years in litigation over whether these technically count as “chairs”. When a few of them win their court cases, the FDA shoots them down anyway for vague reasons it refuses to share, or because they haven’t done studies showing that their chairs will not break, or because the studies that showed their chairs will not break didn’t include a high enough number of morbidly obese people so we can’t be sure they won’t break. Finally, Target spends tens of millions of dollars on lawyers and gets the okay to compete with IKEA, but people can only get Target chairs if they have a note signed by a professional interior designer saying that their room needs a “comfort-producing seating implement” and which absolutely definitely does not mention “chairs” anywhere, because otherwise a child who was used to sitting on IKEA chairs might sit down on a Target chair the wrong way, get confused, fall off, and break her head.

Wednesday, August 24, 2016

Aging populations and the slow recovery

Macroeconomic analysis typically focuses on money markets, government spending, private saving, and the like.  When explaining the causes of recessions and recoveries, the analysis typically looks at variables such as exchange rates, interest rates, and tax policy.  Demographic factors typically receive scant attention.

But we know we have an aging society.  Japan has faced this challenge for 20 years and has had flat growth.  Most European countries are in the same boat, at least for their native populations.  So could aging have something to do with the not-so-hot recovery we have experienced over the last seven years?

A study by economists in the RAND Corporation and Harvard Medical School suggests there could be something to this.  (Click here for a WP summary.)  They explored different states of the US and found that the regions with the most aging had the slowest growth.

What might be going on here?  Obviously with more retirees, the labor force shrinks and that hurts economic growth.  Maybe today's more elderly population saves more because of uncertainty about Social Security, pensions, longevity and their own savings.  With an apparent surplus of savings chasing ever lower yields, this also could be a drag on growth.  The study finds that productivity falls with aging, a wrinkle that is hard to easily rationalize.

Bottom line: if this study is correct, then we may be in for a longer period of slow growth than anyone has anticipated.

Saturday, August 20, 2016

Tuition: at private schools it is just the sticker price

Harvard's Danielle Allen (no relation) has a great WP op-ed today about tuition.  At private schools tuition is just the sticker price paid by the students with the wealthiest parents and little athletic ability.  Most students get some scholarship funding, which acts as a discount.  Those from low-income families pay no tuition.  At prestigious private schools, the posted tuition number is actually well below the full cost of schooling; the rest is paid through endowment income, grants, and other sources.

Allen argues that publishing a single tuition number has adverse effects.  When private schools increase their tuition, it also increases the demand for public universities, thereby allowing them to charge more tuition as well.  But in the publics, financial aid is much more limited and a much higher percentage of students are paying the sticker price.

Instead of publishing a single tuition number, Allen would have universities publish the full cost of education, the range of aid options, and how much aid the average student gets.

Friday, August 19, 2016

Job gains in the middle of the wage distribution

For at least two decades the data have shown a hollowing out of jobs in the middle of the wage distribution.  Job growth has been concentrated in the two extremes: the high end and the low end.

But that trend may be coming to an end.  Today's WP has a short article summarizing research by the New York Fed on job growth by wage tiers.  There was much more job growth in middle-wage jobs between 2013 and 2015 than there was in the low and high wage tiers.  Industries such as construction, education and transportation led the way.

Monday, August 15, 2016

Court ruling allows more MBAs to take tax deduction

Saturday's WSJ reports great news for MBAs for the coming school year: more of you will be able to write off your tuition against your tax liability.  Here are the rules as stated by the IRS:
To be deductible, your expenses must be for education that (1) maintains or improves your job skills or (2) that your employer or a law requires to keep your salary, status, or job. However, even if the education meets either of these tests, the education cannot be part of a program that will qualify you for a new trade or business or that you need to meet the minimal educational requirements of your trade or business.
Professional MBA programs, such as NC STate's evening and online MBA, have qualified for some time, especially for those who plan to stay with their current firm.  The new ruling apparently opens the door for Executive MBA programs too.  Also, the new ruling allows a deduction even for those who are unemployed part of the year.

I am not sure these changes will make a big difference for NC State MBAs, but all MBA students need to be aware of the opportunity to take a tax deduction for their schooling expenses, including tuition, books and transportation.