Markets

This commentary appeared in The Wall Street Journal on April 30, 2013.

Ronald Coase ranks among the world's most influential economists, yet he rarely appears in the media spotlight. That's because he channels his influence through other economists, while maintaining a prudent distance from the glare of quotidian policy disputes. Mr. Coase, who received the Nobel Prize for economics in 1991, has originated some of the most important economic ideas of recent years. These include the eponymous Coase Theorem, which states that strong, precisely defined property rights can reduce the social costs of private transactions. He has also pioneered the law-and-economics field, using economic insights to illuminate legal problems. He's 102, yet his intellectual output remains dazzling.

In “How China Became Capitalist,” Mr. Coase and Ning Wang, an assistant professor of global studies at Arizona State University, offer a “historical narrative of the chain of actions” that brought about China's remarkable transformation from a deeply impoverished socialist country to the world's second-largest economy.

This commentary appeared in Foreign Policy on April 22, 2013.

As Iran's economy continues to deteriorate, the labor movement is a key player to watch because of its ability to pressure the Islamic Republic through protests and strikes. Iranian labor, encompassing unskilled workers from rural areas and lower-class urban laborers is not a homogenous group. And thus far, Iranian laborers have not joined the opposition Green Movement en masse. But the economic pains caused by the Iranian regime's mismanagement, corruption, and international sanctions have dealt serious blows to worker wages, benefits, and job security — enough reason for Iranian laborers to organize and oppose the regime. Parallels can be drawn between the Islamic Republic's treatment of the labor movement today and the Shah's treatment of Iranian workers before his overthrow, particularly in the regime's denial of the right to organize, the quashing of protests and strikes, and its refusal to address worker's rights.

Labor participation in the 1979 revolution was the result of long-standing frustration and resentment toward the Shah's industrialization efforts. The Shah's 1963 White Revolution, which brought major land and industrialization reforms, and Iran's rising oil prices from 1965 to 1975, compelled millions of Iranians to move from rural villages to major cities. The White Revolution's reallocation of rural property from wealthy landowners to farmers led to a steep decline in agricultural productivity. Farms were not as efficient in the hands of farmers as they were under the business-savvy elite. As a result, farming jobs dwindled in the late 1960s, forcing farmers to look to the cities for opportunity. Many of these rural migrants took jobs in construction, factories, and the energy sector.

President Obama has said he intends to enroll, personally, in one of the health insurance exchanges created under the Affordable Care Act (ACA) when they become active later this year. So which one?

Speculation has focused on his home jurisdictions of Illinois or District of Columbia. But the President may want to consider a multistate plan (MSP). A recent RAND study analyzed MSPs and the population that may seek to enroll in them.

Over the last two decades, the number of disabled workers receiving Social Security Disability Insurance (SSDI) benefits has nearly tripled. At the same time, the number of disabled people in the workforce declined from four disabled workers for every ten non-disabled workers to two disabled workers for every ten non-disabled workers. Unfortunately, the structure of the SSDI program itself has been a major force behind the decline in employment of disabled people.

To apply for SSDI benefits, people must stop working for at least five months—regardless of the extent to which they might be able to work. If a disabled individual is ultimately denied benefits, that individual may then return to the labor force, but by that time he or she may have lost additional work capacity—in the form of skill depreciation—while waiting for an SSDI decision.

As Nobel laureate Kenneth Arrow famously observed, health care doesn't behave like a normal market in which both buyers and sellers have the information they need to make a decision. In the health care market, sellers (physicians, hospitals, health plans) have the advantage because they usually know far more about the product (medical care) than buyers (patients) do. So consumers have played a limited role in the market.

However, there is one dimension of health care about which only consumers have accurate information: their own experiences with care. Only patients know whether their pain was adequately controlled in the hospital. Patients can observe and reliably report whether health care providers communicated clearly with them, whether they experienced long waiting times, or whether they were treated respectfully. The Consumer Assessment of Healthcare Providers and Systems (CAHPS) family of surveys is designed to capture these and similar observations in a systematic way that facilitates reporting the results publicly to help other consumers make care decisions. The assumption is that reporting consumer experiences can shape the market by helping other consumers make more savvy decisions. In addition, consumer choices may influence providers and purchasers to improve the care they offer so that they can effectively compete in the market.

This commentary appeared in The Orange County Register on December 11, 2012.

For nearly all of the 20th century, employment of older workers decreased as increasing numbers retired. But since the mid-1990s, this trend has reversed. Employment among men at least 65 years of age, for example, has increased.

The Great Recession of recent years has masked this long-term trend and the reasons for it and has also led to some erroneous conclusions about it. Often older workers are seen as being in the way of younger workers who need them to step aside to free up jobs. Yet, there is hardly any evidence to back up such an argument.

As the U.S. Supreme Court considers the constitutionality of the Affordable Care Act's (ACA) individual mandate, one of the questions being debated on Capitol Hill is what effect the mandate, if upheld, would have on employer-sponsored health insurance coverage. Most private (non-government) insurance in the U.S. is provided through employer-sponsored coverage, and opponents of the ACA have in recent months argued that the law would lead many employers to stop covering their employees.

Republicans on the House Ways and Means Committee have released a study looking at how large employers might respond to the ACA when it comes to employee coverage. According to a report in The Hill, the study finds that the ACA "gives the country's biggest businesses a strong incentive to quit offering healthcare benefits" because they "would save billions of dollars"—$28.6 billion in 2014 alone.

Likewise, the Washington Times reports that the Republicans' study found that employers could save nearly $5,000 per worker if they chose to drop coverage and instead opt to pay the $2,000 fine per worker. The report is based on data that 71 Fortune 100 companies volunteered.

But Democratic staff on the Ways and Means Committee disagree, citing the fact that many large companies were voluntarily providing coverage well before the ACA was passed. "According to the logic of this so-called report, businesses could have 'saved' even more money if they dropped employee health coverage years ago, which is perfectly legal and carries no penalty," CQ Healthbeat quotes Democratic staff as saying.

Given how markets are responding thus far, Osama Bin Laden's death is likely to have a modestly positive and buoyant effect on equity markets. Business abhors uncertainty. With Bin Laden gone, one major source of uncertainty is removed, along, one hopes, with his hallmark of large-scale coordinated violence.

A net positive effect may ensue in Libya. On one hand, Qaddafi claims al Qaeda as an adversary, so Bin Laden's elimination might be construed as adding to the Libyan tyrant's self-confidence and sense of his own endurance. On the other hand, the deadly and deft force wielded by the U.S in taking down one bitter enemy could undermine Qaddafi's confidence in his own survival and encourage his willingness to depart. If Bin Laden's takedown hastens Qaddafi's departure, Libya's relatively small contribution to global oil supplies is likely to resume. In that case, uncertainties may also abate among the larger oil suppliers, and rising oil futures prices may be reversed. We are already seeing signs of this sequence.