Tag Archives: Economics

This week’s big news was that the US economy lost the fewest jobs in a month since the beginning of the recession. There were reams and reams of news and opinion on the matter. Quotes from the White House, Republicans, Democrats, Wall Street and Economists. But I got stuck on the third paragraph of the first news item that I read on the matter on NYT

In the best report since the recession began two years ago, only 11,000 jobs disappeared last month, the government said on Friday, and the unemployment rate actually dipped, to 10 percent, from 10.2 percent the previous month.

What’s the math that allows the unemployment to go down when 11,000 jobs were lost? Did the denominator suddenly go up? Did all the returning Indians suddenly decide to go back to the US like Shiva Ayyadurai?

The answer seems to be

Not only did the rate of job losses drop to 11,000 but losses in the previous two months were revised down by 159,000.

which is not really offered as an explanation but as an aside by FT. But the numbers look like they should be able to explain the drop in unemployment. Does anybody have the official explanation?

Economics by its nature is complex. Good reporting should make it more accessible. Not leaving obvious questions unanswered would be a start.

Philippe Douste-Blazy, the Chairman of Unitaid and the former French foreign minister writes in an op-ed in the New York Times about how the world could come up with the funds to meet the United Nations Millennium Development Goals

The one untapped source that could easily provide the amount of money needed is the foreign currency market, which handles almost $800 trillion in trades annually, all of which is untaxed. A tiny levy of 0.005 percent on transactions involving the world’s most traded currencies — the dollar, the euro, the pound and the yen — would raise more than $33 billion annually for development, while not hurting the market or affecting the average international traveler.

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Tom Friedman in his latest column Real Men Tax Gas writes about a gas tax that could potentially fund healthcare, reduce the deficit and still have some leftover to make it up to people who can’t afford the tax:

Such a tax would make our economy healthier by reducing the deficit, by stimulating the renewable energy industry, by strengthening the dollar through shrinking oil imports and by helping to shift the burden of health care away from business to government so our companies can compete better globally. Such a tax would make our population healthier by expanding health care and reducing emissions. Such a tax would make our national-security healthier by shrinking our dependence on oil from countries that have drawn a bull’s-eye on our backs and by increasing our leverage over petro-dictators, like those in Iran, Russia and Venezuela, through shrinking their oil incomes.

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I have written about the virtues of simplicity in business before. But when I look around things are getting more and more complex.

Take the tax code for instance. The US tax code is so complex it is almost impossible to deal with for the average tax payer. An example of this is the Flexible Spending Account.

The FSA is supposed to give the tax payer a tax deduction on healthcare expenses that are not covered by their health insurance. It includes deductibles, co-pays and some kinds of health care expenses that are typically not covered by health insurance.

So far there’s not much you can object to. But the implementation is where it gets tricky. At the beginning of the year the employee must elect the amount to be deducted from their pay towards funding their FSA account. They can’t spend more than what is pre-funded in their accounts. If they spend less, they lose the money!

To me this seems hare-brained. If you are expenses go way over say because of some dental surgery expenses where the copays are high, you are out of luck if you didn’t foresee this at the beginning of the year. If your expenses are well under at the end of the year, you either lose the money or in the last month go hog wild buying OTC drugs that you don’t need. Who wants to see their own money go waste?!

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In the current debate on healthcare I’ve started hearing something that is quite familiar – pay for performance. The notion is simple – doctors should be paid based on patient outcomes not on the volume of work (fee-for-service). Its intent is easy to agree upon, but terribly difficult to implement.

In the Consulting and IT Services we have seen performance or outcome based pricing go through the entire hype cycle without getting any adoption to speak of. It’s not that customers didn’t want it enough or that vendors dragged their feet. It is just too hard to do. As a result, whenever I have seen pay for performance in contracts they have been in the form of bonuses that have never been big enough to impact vendor profitability seriously.

Pay for performance will be difficult to achieve in US healthcare as well. For reasons that are not very different from why they didn’t work in the IT industry. Here are the challenges:

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