Sandra J. Peart – The Jepson Blog

A Plea for Balance: As health-care reform advances, it's important to remember which aspects of our current system work

BY SANDRA J. PEART

It's been some time since I lived in Canada. Much of what I know of the health-care system there comes from that experience and the ongoing conversations I have with relatives and friends who are now of an age to place demands on the system. As a graduate student, I needed very little in the way of medical services. Wisdom-teeth extractions weren't covered by the system. I had to have those done at reduced rates by a dental student at the University of Toronto.

In Canada, we revel in the universality of the system. Rightly so: It's wonderful to know that all have access to affordable basic medical services. The simplicity of the system is breathtaking €” especially for one who has for some time had to deal with the American version. I never saw a bill for any service covered by OHIP, the Ontario Health Insurance Plan. Since there is sometimes a misconception about this, I should say as well that I did have some choices for my health: I wasn't forced to take on a specific doctor. Other choices, however, are more circumscribed.

These are, perhaps, the best features of the Canadian system: universal access, simplicity and choice.

They are also its weaknesses. In a system that is increasingly stressed for resources as the population ages, it seems unreasonable to expect that the provinces can continue to offer "free" services to all Canadians irrespective of income or wealth levels. By this I don't mean to suggest that services should be restricted to those who can afford to pay for service. On the contrary, it may make sense for those at the higher end of the income distribution to pay a larger amount for the services they demand. This is what has apparently happened as wealthier Canadians increasingly add private-insurance supplements to the publicly provided plan. As for simplicity and choice, though I enjoyed the lack of medical bills or statements when I lived in Canada, I had no idea what anything cost there. That just wasn't sensible. More than this, some items (my wisdom teeth) are simply off the table, unavailable through the public plan €” as a result of tough choices that OHIP makes for all in order to maintain fiscal viability.

Any system that offers services that are free of monetary payment needs to come up with a rationing scheme. Waiting times might do it: They are longer in the Canadian system than they might otherwise be. But it may be that Canadians would be willing instead to pay money (as opposed to time) for services. Co-payments might help preserve the integrity of the system, and they have the added benefit of making those who use the system think seriously about whether the visit to the doctor is really needed.

It's important to recognize, as well, that extended waiting times and overstressing a system have real consequences. A relative, now deceased, was recently hospitalized for chemotherapy treatments. He suffered a series of strokes while there; no one noticed until it was entirely too late to treat him adequately. Continue reading A Plea for Balance: As health-care reform advances, it's important to remember which aspects of our current system work

Economists must speak up and lead the national dialogue during this time of crisis

BY SANDRA J. PEART

A "teach-in" is how David Warsh referred to the conference near the end of a session attended by students, university trustees, professors and guests. In that significant moment, Warsh affirmed that the room had a teaching feel to it. Unspoken but significant was the acknowledgment that for too long the discussion among economists has been unhelpful or nonexistent. Indeed, a major rationale for organizing the conference was the glaringly obvious lack of debate among economists before passage of the bailout package last fall.

Indeed, that $700 billion bailout passed with surprising alacrity in the light of the serious difficulties that had become apparent. Too little discussion, public or private, preceded that enormous undertaking. And now the country's politicians have committed to spend an amount that exceeds TARP, again with little national discourse. More than this, as economists ourselves we were struck by just how long our discipline has been, as conference participant James Buchanan put it, "missing in action." Even the election campaign failed to spark substantive discussion of the bailout. Now, we've done it again. We've committed to spending another enormous sum of money with merely a few days of discussion and no substantive national dialogue about the significance of the event or how best to set up rules for spending in the stimulus package.

Though some economists are of course involved at the highest levels of policy making, the rest of the profession has been curiously absent from the discussion. We've seen a number of significant letters and some op-eds published as passage of one bill or another became imminent, but most of the profession remains on the sidelines.

Though we have been educating droves of economics and business majors for decades, we seem to have had little impact on the ability of the American public to understand the causes of the crisis.

Economists have been marginalized in part because we've been portrayed as entirely inept, unable to come to a consensus. But we've failed to educate the media and others that there is in fact a good deal upon which we do agree. On fundamentals, principles, there's less disagreement. Our January conference demonstrated just that. Though we had economists from the political left and right taking part, there was remarkable agreement on fundamentals.

On what did we agree? The current crisis is extraordinary because of the very unusual combination of financial and housing market collapses. Consumption spending, financed by expected increases in housing, has been fueled by unrealistic expectations, and now the price is being paid for the correction of expectations.

In partisan discussions today, people tend to "blame" one group or another for the crisis: Greedy financial tycoons caused it all, or government policies caused it all, the conventional wisdom goes. There is blame to go around, but a more fruitful way to look at the crisis is to forego finger pointing and accept that it's been caused in part by policy failings and in part by the actions of private individuals and organizations. Significantly, the economists who met in January did just that: We avoided partisan blaming and agreed that the crisis is the result of a combination of private and public failings. This came from economists whose political views spanned the spectrum of left to right.

We also agreed that it's unhelpful to pin the cause of the crisis on an increase in greed. People have always been subject to a mix of greed, self-interest and generosity, and that hasn't changed in the past decade. But new financial instruments were developed that were less subject to regulatory oversight than others. The complexity of those instruments made them non-transparent and encouraged buyers to trust the judgment of experts.

We agreed that prices are robust mechanisms to convey information. Not a new point, surely, but it is one that somehow was lost, as models were developed to evaluate the worth of non-traded assets. When we replaced market prices with estimates from models, we added non-transparency to the system.

We agreed on the need for transparency, and that simply calling for it won't ensure we obtain it. Sometimes the incentives are such that people want to hide information. The trick for policy makers is to think about how best to ensure it's not in their interests to do so. It is as true for politicians as it is for ordinary people.

We agreed that expertise is needed as we attempt to move out of the collapse. Moreover, discussion is needed to help all of us understand that the answer to our problems now can't happen in one sphere (public) or the other (private). Instead, we'll need to see a combination of fixes. Individuals will need to realize that before consumption can happen, the means to consume must be secured. Some of that restraint will eventually also be necessary in the public sphere. Meanwhile, the fix will have to take account of simple but important economic ideas, such as incentives, prices and transparency.

One final theme from the conference was that economists have marginalized themselves. As Dave Colander put it, the profession has increasingly trained up "show dogs" as opposed to "work dogs." The incentives in the profession are such that those who produce research for highly specialized journals are rewarded. Those whose work is grounded in problems of the here and now haven't been so much in demand.

This is why David Warsh said economists could provide a valuable service by holding more public sessions like the forum at the Jepson School of Leadership Studies. "It's easy to imagine economists of all stripes being involved in more discourse with the public," said Warsh, a former Boston Globe reporter whose blog, Economicprincipals.com, covers economic news and trends.

The time is ripe for more "teach-ins."

This essay was published in Richmond Magazine’s series “Leadership in Action” March 2009 .

This winter, 16 eminent economists met at the Jepson School of Leadership Studies at the University of Richmond to discuss the American financial crisis. Sandra J. Peart and David M. Levy organized the meeting on "Leadership in Times of Crisis: Economic Science and the Constitution." (Read more and watch the Webcast of proceedings at http://news.richmond.edu/jepson/features/summit.html ) A theme that emerged is that economists – and experts generally – need to correct the persistent misconceptions of the causes. The conference organizers offer reflections on the meeting and the next steps.

Leadership and nonprofits

To get things started here, I thought it would be a good idea to review the importance, in economic terms, of nonprofits in VA. So I’m pasting in a good part of the op ed that appeared in the RTD a while ago.

The joint report of the Johns Hopkins Nonprofit Economic Data Project, the Connect Network, and the Community Foundation serving Richmond and Central Virginia presents a clear case that nonprofits generate significant economic benefits in this state. With 31 billion dollars in revenues and 211,000 paid employees in 2005, the data show significant levels of nonprofit impact. The nonprofit sector is the second largest employer in the state, behind only retail trade in terms of numbers employed. The equivalent of another 139,000 full time workers volunteered for nonprofits.

For many of us, these are astounding facts. All-too-often we think of nonprofits as the social and economic equivalent to an organized self-help group that survives mostly on donations. In the eighteenth and nineteenth centuries British friendly societies did provide a mixture of recreation, ritual, fraternity and insurance for working-class men and their families.

Today, the landscape of the nonprofit world has substantially changed. It now extends to paid employment. No longer are nonprofit services provided exclusively to those who have joined a club. Instead, 31 billion dollars in revenues generated indicate that a great number of people now purchase the services of nonprofits.

So, institutions of higher education like the Jepson School of Leadership Studies and hospitals represent a significant segment of the nonprofit world today, alongside vast numbers of smaller organizations. In 2005, Virginia hospitals employed fully 35 percent of the nonprofit workforce, nursing and residential care, 11 percent, and elementary through post secondary education employed 13 percent.

What are we to conclude from the joint report? The state, the economic impact of nonprofits is strong. A major implication of this study is that nonprofits constitute a significant piece of the economic landscape. More than this: those who work in nonprofits supply services that local people need and want. In doing so, nonprofit workers acquire and use local knowledge. This suggests that there are mutual gains to be realized as that local knowledge might be shared with corporate and political leaders. Nonprofit, for-profit and government spheres within Virginia have much to learn from each other.

No doubt, nonprofits also generate "spillover" effects. They raise awareness and provide early indicators of a need (to be filled by for-profit, nonprofit or government), and developing leaders. Those who work in nonprofits identify common needs. More than this, they develop solutions.