Thursday, December 19, 2019

econlife - Six Surprising Facts About Our Prescription Drug Spending by Elaine Schwartz


Most of us say that our pharmaceutical drug spending is soaring.

Not necessarily.

Prescription Drug Spending Facts

Yes, our prescription drug spending is up. But the reasons relate much more to our age and health than to prices.

1. Canada spends more.

When we look at average per capita out-of-pocket spending on prescriptions, in 2017, Canada ($144), Norway ($178), Korea ($156), and Switzerland ($216) spent more. In the U.S., the average was $143.

2.  Prescription drug spending has been stable or falling.

Between 2013 and 2018: average household spending on prescription drugs was down by 11 percent according to the BLS Consumer Expenditure Survey:





3. Prescription drug spending represents an increasingly higher proportion of our income as we age.

Many baby boomers have begun to spend close one-third of their income on prescription drugs:



4. As we age, we buy more prescription drugs that cost us less.

Although we buy many more prescriptions, the out-of-pocket cost per prescription falls:




5. Our out-of-pocket spending on prescription drugs is up less than for most other healthcare categories.

Second in a 10 item list, prescription drug spending was up 8 percent from 2013 to 2018:



6. People with fair and poor health pay less for each prescription.

The average out-of-pocket cost per prescription for a healthy person is approximately $15 while it’s closer to $13 for someone with poor health:




Our Bottom Line: Thinking at the Margin

Alfred Marshall was the first economist to look at the significance of the margin. Defined as where you start to use extra, the margin is where we decide if we want more of something. When you order another slice of pizza, you are thinking at the margin. Similarly, how fast you drive, how much you study, and whether you sleep later in the morning all involve marginal analysis.

For prescription drug spending, we’ve probably been looking at the wrong margins. Directing our economic lens to the extra spending we do as we age could provide more insight.

My sources and more: Thanks to Marginal Revolution for alerting me to The Prescription Escalator that was described clearly and thoroughly by economist Michael Mandel. From there, I took a look at OECD pharmaceutical spending data.


Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

Tuesday, December 10, 2019

econlife - What We Can Learn From a Trout by Elaine Schwartz


It sounded like a good idea. If your fish population is dropping just spawn more in a hatchery and then deposit them back in their native waters.

The results were not quite what they expected.


The Fish Hatcheries Dilemma

Our story starts in the 1870s when New England’s Atlantic salmon became increasingly sparse. Responding, the Congress established a U.S. Fish Commission and from there we got fish hatcheries. All they had to do was grow fish in tanks and then deposit them in depleted waterways. They thought it was win win. More fish for sport, more to eat, and no need to conserve.

The rest is history.

Having hatched (sorry) a seemingly viable approach, it multiplied. We wound up with hatcheries for fish like shad, bass, and trout. We had hatcheries with rainbow trout from the West, brown trout from Europe, and the brook trout from the East. After their young were born, the Western fish could be transported to the East, the Eastern stock to the West, and the European trout across the U.S.

At first, baggage cars were retrofitted for the trains that moved the fish around the U.S. Once, when a railway bridge collapsed, 300,000 fish (including perch, bass, trout, and lobsters) accidentally found a new home in Nebraska’s Elkhorn River. Today, with trucks and even helicopters, New Hampshire alone stocks ponds and rivers with more than a million trout.

A railroad fish car:




This is where the problems start. When hatchery-raised trout are brought to a natural habitat, they can upset the existing order. They might eat the offspring of the wild fish and compete for the food supply. They also can bring disease. As for their own survival, many die when they are not as healthy as the local fish population. Associating overhead shadows with the food “delivery” they got in a hatchery, the trout swim upward only to be greeted (and eaten) by a bird or animal on the surface. The result is a ripple of consequences affecting the local animals that feed off the local fish. I read one example where the osprey and even the bears had to adjust.

However, offsetting the problems that they present, Outside/In tells us that, “…abundant, easy to catch fish, get people excited about nature, and protecting it.” They quote recreational advocates who say,  “We stock fish because we want people to fall in love with them.” They remind us that for young people to start to experience the joy of fishing, they need the local ponds that have the population. Then, not even caring if they catch a fish, they move onward to more remote locations.


Our Bottom Line: Tradeoffs

So you see we have a dilemma. We have recreation and conservation. We have the fishing advocates who believe more fish make people care about fish. But there also are the habitat concerns.

As economists, we can return to tradeoffs. Indeed, even a trout teaches us that there is no free lunch.

Do enjoy this delightful video:





My sources and more: Listening to the Outside/In podcast yesterday morning, I especially enjoyed my morning walk. If you want more, the story of the railroad fish car and a Fish Commission timeline are possibilities. My choice though is this NY Times article from 2012 for the fish hatcheries debate.

Our featured image is from Outside/In.



Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

Thursday, December 5, 2019

econlife - The Inventions That Mattered Most by Elaine Schwartz


We all know about the curb cut but probably never think about it. It’s just that slanted part of the sidewalk leading to the street:



The curb cut was invented for those of us who need a slope rather than a step. Fifty (or so) years ago, it first appeared in Berkeley, California where a group called the Rolling Quads wanted to navigate the streets independently in their wheel chairs. They convinced the Berkeley City Council to mandate curb cuts and the rest of the story is history.

One of millions, the curb cut was a part of our invention history.

Invention History

Looking back 180 years, researchers recently tried to make sense out of close to 10 million patents. They hoped to provide analytic order to some messy data.

You can see below that they were able to figure out the rhythm of innovation. It seems to have unfolded in waves. The second wave peaked during the depths of the Great Depression in 1932 when the unemployment rate was just below 25%:



They also wanted to extract the most influential inventions from the data. To arrive at some conclusions, their algorithm looked for inventions with patents that were different from any that preceded them. On the other side, it identified innovations on which many subsequent patents were based. All combined, because the database started in 1836, their algorithm grabbed patents between 1840 and 2010.

Among the 100 “breakthrough” innovations that were listed, these were the top 25:




Each breakthrough had a network like the following:





Our Bottom Line: Economic Growth

NYU economist Petra Moser said that “Innovation is the engine of growth.”

In 1998, a wave of innovations that relate to software and bioscience appear to have peaked. Now, the decline is evident. Knowing more about invention history can help us stimulate more in the future. We can try to accelerate a slowing rate of economic growth as measured by the increase in the GDP.



The bigger picture:




Where are we? Returning to where we started, yes, the curb cut was not among the most influential inventions. However, enabling us to get where we are going more easily, it and millions like it certainly added to the productivity that feeds economic growth.

My sources and more: The 99% Invisible story of the curb cut was the perfect complement to this The Washington Post invention history.  But if you want lots more detail, do look at the paper on which The Washington Post article was based. It is all phenomenal!



Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.