The Health Care Reform Bill: Round…?

With the Senate Finance Committee Bill has finally reached the Senate floor, it looks that a bill (with or without a public option plan) will be heading for the conference committee to be reconciled with the House Bill. By the end of the year, if not sooner, a Reform Bill will be on its way to the White House which would certainly be signed by the President. Short of a “mishap” or a “disaster” (or for Republicans a ‘miracle’), an overhaul of the US Health Care system is in our future.
Judging the outcome as ‘Good or Bad’ will await implementation of the final bill. Such judgment is not however the intent of this Blog. Given the broad outline of the bill, the issue that I would like to address here, which is in my view has been overlooked or swept away under the congressional rug is “access to medical care”.
The fact that the bill, assuming its passage, mandates that “one and all” be enrolled in a health insurance plan and that it would penalize those without insurance, the expectation is that some 31 million uninsured persons will have access to the US Health Care System. The prospect of being insured does not automatically translate into access to medical care. Let me elaborate. Unless you are covered by an employer plan, providers of health insurance (at least in my city) insist that the would be insured individual or family , (a) has a primary care physician, (b) must be registered with the primary care physician and (c) that said physician be on the insurance company approved list of physicians. Whether applying for insurance by phone, e-mail or by letter, the application is terminated (no enrollment is activated) unless and until these three (a, b and c) questions are answered in the ‘positive’. As an example, let us say that a formally uninsured person heads the requirement of the new Health Care Law and contacts say BC/BS agent. After exchanging a few pleasantries, the agent will get to the heart of the matter: take down responses to a set of questions on the enrollment form. After a few questions such as age, sex, occupation, the next question is whether the would be enrollee has a primary care physician. If the answer is ‘no’, the enrollment process terminates. The applicant could come back for enrollment after securing a primary care physician and either be seen by said physician or be on his/her register. If indeed, by some ‘miracle’, ‘good luck’ or whatever an uninsured individual has a primary care physician and that the individual is indeed registered with said primary care physician, then the next question for enrollment is whether the primary care physician is on the approved list of the insurance company. If not the enrollment process terminates. Of course, the insurance company is more than happy to supply the applicant with names from their list for the applicant to contact and once again the company agent tells the would be enrollee that once any one of those physicians accepts the applicant and be registered, the applicant can contact the insurance company again to proceed with the enrollment process.
That does not sound to be such a difficult task. In the age of the internet, it is supposed to be quick and easy to contact your chosen primary care physician(s). No such luck. It is amazing for those of us in academia (most of us any way) to contemplate not responding even in the negative to someone who address us via e-mail, phone, fax or in other media. In the case of primary care physicians you may not be able to go that “minuscule” mile.+ Talking from experience, as I shall elaborate below.
Primary care physicians who have posting on the web (most of the time those physicians are staff members at some medical school), will enumerate their expertise, specialties, research and so forth but give no valid phone number or fax—and if valid, no one responds when you call and the fax is inoperative. But that is not so bad, what is bad is that almost all with those glorious “bio” end up the write up with the “standard phrase” (DO NOT ACCEPT NEW PATIENTS). So, the search continues. The next search vehicle is to go back to the list of providers that are listed on the web of the selected insurance carrier as accepting new patients. Unfortunately, it seems that such a list is not current because at the point of contact, once again the sentence (DO NOT ACCEPT NEW PATIENTS) dwarfs everything else.
How to circumvent this? Some of us who did research or writings about comparative health care systems (US and UK) in the 1980’s and the 1990’s were, back then, smug enough to point out to our British colleagues the deficiencies of their health care system. Most of said deficiencies had to do with access to medical care: the long waiting lists for registering with a physician; denial of some procedures like kidney dialysis or transplants to some patients (those over 55 years of age)—i.e. rationing of medical care. Well, with no access to a primary care physician you might as well not bother with the quality of access.
What I have put down here is not fiction or a made up story to knock down the reform. Rather the intent is to seek a fix to a problem that will plague the health care access in the US following the enactment of the reform bill.
I, an insured person for more than 30 years, had the same primary care physician over this period, with excellent insurance coverage faced the same problem—access to services of a “primary care provider”, following the retirement in October 2009 of my primary care physician. The Group practice or clinic that was willing to take on the patients of my primary care physician looked promising enough for me to seek the services of one of their “internal medicine” physician. Having settled on one of the four, I called the office to get an appointment or as the insurance company agent have put it “get registered”. I was told sorry: this physician does not take new patients, another one, my second choice was also unavailable. Thinking that well for the time being I should register with whoever was available, I was then informed that the group practice does not accept my insurance. At that point I was not willing to continue the dialogue—not my first choice and not my insurance! At first, the group practice (a clinic or whatever it is called) responses did not in the least bother me. As the saying goes: “don’t cry over the fish that got away, there are more fish in the sea”. My search for the “elusive” primary care physician proceeded with a vigor. I decided to find out, first of all, which insurance carrier in my city has the largest list of providers; which carrier (because of something or other) has a wide acceptance by physicians, hospitals, etc and which in addition provides the type of plan I seek (PPO or Preferred Provider). Having thoroughly identified such a company (call it X company), I called to switch insurance provider. I called and get the “X” company brochure. I looked at their coverage and was satisfied that it offered the plan I sought. So I contacted the representative. I was told I can enroll by phone. Delighted (no paperwork), the process began. Guess what? Can’t proceed without “a primary care physician”. I informed the agent that my physician has just retired. Sorry about that but get another , get seen by the new primary care physician, get registered then call back to get enrolled. I was given their website to look for a primary care physician who will take new patients. Once again, I did what was expected—contact those on the insurance company list. Waiting for responses from those who did not list by now the dreaded phrase (DO NOT TAKE NEW PATIENTS), I decided to expand my search by asking a few MD specialists who have known me over the years as well as friends for help. I was delighted with their responses. I got names of at least 20 primary care physicians. I e-mailed some (I felt that as professors at a medical school, and I am also an academic professor at a University, the chances for a response even in the negative is likely); called the numbers I was given, but the response turned out to be the same. A central agency operator answered my inquiries about all the physicians I wanted to contact: “None take, new patients but you can be ‘wait listed’ on one or two”. A total waste of my time. Fortunately, a family friend, a former professor at my university suggested I contact his physician. Haleluya—the physician was on the list of the insurance carrier I wanted to subscribe. His office staff was decent enough to register me over the phone and secure an appointment for me. Having done that, I contacted the X-company insurance agent to enroll and was accepted by the insurance company to proceed with enrollment.
As my appointment with the new primary care physician is a bit far in the future, I have asked his staff: suppose that I get ill between now and then; what do they suggest I should do? Well, you would have to go to the hospital’s emergency room to be seen by the ER physician on call.
That is what I mean about ACCESS. I am not or should not be viewed as a FORTUNE teller, but the access problem which is tough enough as it is will get worse, a lot worse unless the problem of access to services of a primary care physician is addressed. Many of us have heard of communities with no primary care physician in sight, of the waiting lists (some reported some 300 people on one physician’s waiting list), the long wait for an appointment, the delay in seeing the physician and so on, but until faced with it one does not appreciate the severity of the problem. There are several reasons for such shortages. Foremost, among them is the differential in pay, prestige associated with specialization and hence the decline in enrollment of medical students in internal medicine.
A recent GAO study, (February 12, 2008),: “Primary Care Professionals: Recent Supply Trends, Projections, and Valuation of Services”, provide information on supply of primary care professionals for 2 years, the base year of 1995 and the recent year, 2005. According to the study, there was 264,086 primary care physicians in 1995 compared to 208,187 in 2005, which gives 90 primary care physicians per 100,000 people in 2005. In 1995 the rate was 80, hence an annual rate of increase of 1.17. This obviously does not give a full picture. More recent data is needed as well as the regional distribution of physicians and, the number of enrollees, office visits and waiting time. Nonetheless, the growth although miniscule should mitigate the problem if it were to continue in future years. *
Hopefully, my experience is an aberration, that there are more primary care physicians out there—if so, well and good. If not, something should be done, and done soon. It is incumbent upon our law-makers to look into this problem before hospital ER are overloaded with patients who are simply there because they have no access to primary care physicians.
A more serious issue is how to get an insurance policy without being registered with a primary care physician. Maybe insurance carriers outside of my city do not have this requirement. If so, I wish to hear from them so perhaps this requirement would be eliminated. In such a case, specialists or other medical practitioners perhaps could fill the bill.
While writing this note, I thought of the British man who was poking the sand on some beach with his metal rod searching for gold. It took him a lifetime to find his gold; I hope it doesn’t take our newly insured citizens that long to get their gold.

+ To be fair, I got one reply. Unfortunately, the physician was not a general practitioner.
* In my next Blog, I shall provide more data on physician per capita, office visits and other pertinent information. Also, a video about the Health Care Reform Bill was suggested by rosa@newsy.com which can be accessed at http://www.newsy.com/videos/health_care_reform_in_2009.

The Continued Saga of Health Care Reform 2009

Many of us or at least some of us watchers of the health care reform debate are pondering the question: will it ever end? Or put differently, when will it end?
During the presidential debate health care reform was at the top of the domestic agenda and with the democratic party wining both the White House and majorities in both houses, the expectation was that, the reform bill should have a clear sailing. The president even thought that he would be signing the reform bill by the end of August or early September.
Here we are at the end of the month of October and no Bill in sight. One could argue that we are almost there. But are we?
From the news account one needs to ask: Are we or are we not serious about reforming the health care system?
Without addressing the specifics of the Senate Finance Committee bill now before the Congress (that will have to wait until a bill garners a majority in both houses—a Herculean task), let me begin with defining the term reform. In doing so, one may perhaps be able to judge the essential character of the bill if not the expectation of what the bill is likely to achieve.
The Merriam Webster Dictionary defines the term reform as: “to make better or improve by removal of fault”, alternatively, “to correct, rectify, emend, remedy, redress and revise”.
If the health care bill is to reform the existing system, then legislators and their constituents (we the people) should be inspecting the bill to see that it meets the criteria set forth to earn the reform label. The first step then is to identify the shortcomings of the existing health care system and in light of these shortcomings look for improvements, redress, corrections the reform bill legislates.
The debate, at least in the media, in my view, is misguided in that it focuses on the “private” rather than the “public” good. Moreover it fails to address the fundamentals of reforms: The principles upon which reform is based.
Our legislators, if not the media should have sought to fathom the debate along the lines used in debating tax reform. Back in the 1960’s, the 1970’s and the 1980’s no discussion of reforming the federal income tax system was deemed “legitimate” without setting forth the principles that should guide tax reform. Before getting into the “Nitty-Gritty” of specific provisions, the principles had to be agreed upon first. Since then it has become the standard for any change proposed or enacted. The well known principles were: equity, efficiency and simplicity.
So what are the principles that ought to guide the reform of the US health care system?
From my readings (albeit not too carefully) of the 259 pages of Chairman’s Mark: America’s Healthy Future Act of 2009, I cannot discern those principles.
Title I (84 pages) deals with: Health Care Coverage. It spells out the proposed insurance market reforms. It goes into details about a wide range of issues from the current insurance system’s shortcomings to setting up new procedures that would replace or amend some of the existing provisions in insurance policies as well as outlining the role of the federal government in addressing these shortcomings. Title II: Promoting Disease Prevention and Wellness (86-96 pages) deals with Medicare and Medicaid. The objective is to insure that Medicare beneficiaries have “access to comprehensive health risk assessment”. For Medicaid recipients, this section outlines the requirement for “improving access to preventive services for eligible adults”. Title III: is about Improving the Quality and Efficiency of Health Care (pages 96-135). Titles IV and V deal with transparency and program integrity, frauds, waste and abuse. Title VI (pp. 231-258) spells out changes in the revenue items like fees, tax credits and itemized tax deductions.
The “meat” of the bill and controversies surrounding the bill is found in Title I and Title VI.
Before getting into controversies surrounding provisions in Titles I and VI, one needs to ask: What are the criteria that underline these provisions?
Title I, subtitle A spells out the proposed reforms to the insurance market. These perhaps are the most straight forward reforms and well understood, having defined reform as “correcting or rectifying” what is there, then one infers that the existing health care system is deficient in meeting either the criterion of “equity” or “efficiency” or both. The corrections deal with pre-existing conditions and guaranteed renewability of policies. No controversy there. What is debatable is the specifics about premiums, rating rules in individual markets to insure compliance with the new directives. If I were to choose a criterion for these reforms the one that is applicable is “equity”. The individual cases put before us during the Town Hall meetings on health care clearly documented the need for action to stave off either bankruptcy of afflicted individuals or families whose insurance was cancelled because of pre-existing conditions or denied coverage for same reason. To providers of insurance, the new regulations give rise to cost that has to be either absorbed by those insured or recouped from them through cost shifting—a rise in insurance premium.
It will come to no one’s surprise to learn that cost shifting is the rule rather than the exception whenever a “tax” is imposed on a product. The shift may occur over time and in many instances may be hidden. Even if cost shifting does occur the insured will not bear the full cost of being integrated in the insurance pool which was denied to him previously. On equity ground as well as efficiency (spreading the cost) this provision meets the definition of reform—redressing a need.
Subtitle B: State Exchanges and Coverage Assistance and Subtitle C: Making Coverage Affordable deserve a great deal of scrutiny. In this regard the on and off “public option” need to be integrated. In my next Blog I will examine these two in light of the criteria of reform set forth above. These need to be examined in conjunction with Title VI where the revenue implications of the reform provisions are spelled out.
For the moment, it suffices to say that the state of “America’s Healthy Future Act of 2009” is in jeopardy. Unless and until the competing interests of the various players in the market are reconciled—the public option in the exchange market, state rights (whether they can or cannot opt out), Private insurers and employers as well as health care providers (physicians and hospitals), the chances for a robust bill, a bill that would meet not only the equity and efficiency of the health care market but also the criterion of simplicity is but an elusive dream.
If I were to design a “Health Care Reform Bill”, I would begin with the following questions: Does the existing system meet the standards of equity, efficiency and simplicity? To answer this question, the system has to be reduced to its components: Access, affordability and efficiency. The three components must then be ranked in terms of priority and trade off made when conflicts occur. Legislators guided by their constituents must rank the three elements. For example should access take precedent over efficiency of delivery? Should affordability be the overriding criterion, or is it the efficiency of delivery. As an economist these are the questions which have to be addressed before a “blueprint for health care reform” is developed. This may be an easy task for an economist but a difficult one for a legislator.

Health Care Outcomes: Is Our System All that Bad?

An article in the Washington Post: “U.S. Losing Ground on Preventable Deaths: Despite High Medical Spending, Results Trail Other Wealthy Countries”, (Ceci Connolly, Tuesday, Oct 6, 2009). Quoting a study by Common Wealth Fund the writer states:
“Although the Unites States now spends $2.4 trillion a year on medical care—vastly more per capita than comparable countries—the nation ranks near the bottom on premature deaths caused by illness such as diabetes, epilepsy, stroke, influenza, ulcers and pneumonia”. Comparing costs and outcomes may not be all that relevant unless everything else is held constant.
The U.S. health care system has always been costlier than other systems in the developed world. Ever since OECD (Organization for Economic Development and Cooperation) has been compiling data on comparative health care, we have been put on notice that as percent of per capita GDP, the U.S. spends more and consumers of health care do not fare better, perhaps worse. This means one of two things, maybe both: The American population are either sicker than the “comparative” population hence the low return of investment on their medical care or that health care providers in the U.S. are “greedier”, “less efficient” in the delivery of health care than providers in other countries.
Let us, for a moment, accept the proposition that our providers are less efficient. The question that arises is why are they? Given the innovation that emanates from the U.S. not only on the diagnostic front but also in the drug therapy, it is worth a moment of reflection to contemplate the failure of the system to meet the efficiency standards of other European health care systems. Such reflection invariably leads us to an assessment of the disease-specific cost of intervention and there lies an ocean of difference between the U.S. system and European Systems.
Economists, rightly or wrongly, when discerning the effect of an increase in the price of good X on the demand for good X, will always tell you, “everything else remains constant”. That may sound foolish since nothing ever remains constant, or at least not for long, when good X’s price rises. We do that to ascertain the direction of effect and not necessarily the exact change in the demand. The same logic should apply to the demand for health services and hence the cost. Comparing the “comparative” cost per service delivered in one country viz a viz another in relation to the corresponding outcomes make good statistics but unfortunately masks a great deal of differences between systems. I tried to emphasize, “everything else remains constant”. That translates into comparing “like” with “like”. How can one judge life/death outcome of a diabetic patient in the U.S. compared to a diabetic patient say in France? The statistics says, a “premature death” for the U.S. patient compared to the one in France. But is this information really telling? To compare outcomes, given cost one first of all need to keep constant the profile of the patient, the environment of the patient, and a host of other issues that frame the comparison. Or take the cost comparison: It may be true that our providers are “greedy” , it may also be true that pharmaceutical pay providers to over prescribe or prescribe expensive drugs, but it is also true that the patient in the U.S. expects and demands to receive the best available medical care.
The U.S. system promotes patient’s right to choose the medical care he/she is to receive. To so many in the U.S. this right is worth the cost society has to bear. To make the cost comparison worth while patients here and there have to hold similar expectations. To make health outcome comparisons, one needs to compare like with like. Neither of these two elements hold in the U.S., European comparison.
Having said that, one should not shrug aside the three critical issues that impact costs and outcome the Post article alluded to. These are:
· The “efficiency” of the delivery of medical services;
· Access to health services , and
· Patients’ expectations
I shall address these issues in conjunction with some of the Senate bill provisions for Health Care reform 2009. Once the bills gets out of the Senate Finance Committee as the bill provisions touches on the issues raised in the Post article.

Then and Now: The Saga of Health Care Reform

The nation or more precisely the Obama Administration is consumed with the debate about health care reform. The debate is far from academic it is commingled with rhetoric, uncivil discourse, charges and countercharges. For those who are not directly involved, who are on the sideline so to speak, the foray is a bit out of place.
Health care reform was at the top of the presidential candidates’ agenda. One and all: democrat, republican, or independent heard the presidential candidates speak about the need to reform the nation’s health care system. Many articles were written comparing the candidates’ plans. Economists and journalists took aim at the specifics of the two major proposals: the Obama plan and the Clinton plan. Nothing was left to the imagination. Judging from the coverage, no one doubted that if either Clinton or Obama won the presidency, health care reform would be at the top of the new president’s agenda.
Given that this expectation has been realized one needs to ask: what soured the population (public opinion seems to be oscillating between for and against) on reform?
There are several reasons that may account for this: The first and foremost is a doze of reality. The president took office in the midst of a financial crisis that brought the country to the brink of economic disaster. Although the recession was already in place prior to the inauguration of the new president, the euphoria surrounding the election did mask the severity of the financial and economic collapse. Americans are optimistic by nature; hence the expectation was that with a new democratic president, a congress with democratic majority in both houses, things could only get better.
Then came the realization that this assessment was too optimistic, that the financial crisis is more severe, and that many people’s livelihood was on the line. When one’s livelihood is on the line, the first priority is “jobs”: putting food on the table. The second or the third, is to make sure that medical care is there when needed.
I believe the administration missed the opportunity to inform the people—those unemployed, those who lost their houses, those who had to file for bankruptcy, those who lost faith in the American dream—that the Administration’s first priority is “insuring” their livelihood. Bailing the financial market first, a sound action to be sure, did not tell the ordinary citizen (Mr. Joe the plumber of the campaign) that his welfare is the focal point of the rescue plan of the economic system. Although actions speak louder than words, in personal crisis words matter as much as concrete actions. People’s interests were not at the forefront, not in the words or deeds until later on in the administration rescue game plan (The cash for clunkers!).
Once the faith of the people in the administration’s ability to address their needs has weaned, critics found an entrée to challenge the administration in all fronts. The most critical and perhaps the most effective challenge is directed towards the Obama’s plan for health care reform. And the public seems to be listening so let me take a minute and raise a couple of questions:
First, do we need health care reform? If not, we can quit now and go our merry way. If the answer is yes, then the “battle” is worth fighting.
Second, how much support “Health care reform” garners? In a democracy the plurality rule of 51% must be satisfied. Public opinion seems to put the support at over 50%. According to CNN, “going into the speech (Obama’s speech on September 8th); a bare majority of his audience—53%--favored his proposals. Immediately after the speech, that figure rose to 67%.”
Third, if the reform is a “mandate”, all must have health insurance by a certain date, then the question of affordability arises. To figure this out one needs to focus on the 15 percent of the population who are without insurance. A bit of information from the presidential debate about health care reform may be helpful at this point.
On March 25, 2008 The Ott Blog discussed the health care reform issue under the title: The Biggest Dilemma: How to reduce America Health Care Costs and “Ensure” an Affordable Quality Health Care for All? The article briefly compared candidate Obama’s plan with candidate Clinton’s plan. Although these two plans differed, they had two themes in common: Expand coverage to the uninsured and “cap” spending on health care.
Having set these two straightforward goals, implementation as everyone is finding out is not so straightforward. As it is turning out, the “DEVIL” is in the detail.
What was candidate Obama’s blueprint for reform (Barack Obama’s Plan for a Healthy America)?
· Coverage: Expand insurance coverage to the uninsured. No need for mandate, except for coverage for children.
· Choice: Offer all Americans an enhanced choice in the selection of insurance coverage through a mix of private and public plans. A new public insurance program would be offered to those who neither qualify for Medicaid or SCHI, nor covered by employers’ plans. He also called for a “National Health Insurance Exchange.”
· Quality and costs: Improve quality and cut costs through monitoring of services and modernizing the system.
True to his platform, the president put into motion his legislative agenda: To reform the US Health Care System. His reform proposal in its broad outline departed very little from the blueprint of reform outlined in the “Barack Obama’s plan for a Healthy America.”
Why then has it taken so long to enact a plan? And why all those cheap shots and not so cheap shots are lunched against the reform?
To answer these questions one needs to look at the realities of reform—the players; the legislators; our representatives in congress who write the laws, The Providers: Insurance companies, hospitals, physicians and nurse practitioners.
The payers: Those with employer provided insurance; those with own private insurance and those on Medicare.
The uninsured: Those who must now buy coverage.
I shall discuss how each of these groups is likely to fare or believe they fare under the reform plan (once the bill sets out of the Finance Committee) in my next blog.

A Salute to the Assistant

On this day in May (May 17) and on so many other days in May, I have witnessed the “crowning” of so many assistants. The assistants’ assistance, at least for me and for those like me, is indispensible to our work. We rely on the assistant’s skills for carrying out data analysis, word processing, typing draft, deciphering illegible hand writing, and above all doing the task with geniality, respect, love, and appreciation of the learning experience.

On this day in May, Clark University Economics Department graduated six new PhD’s and Seven MA’s. Over my tenure at Clark of more than 35 years I have the privilege not only of being involved in the education of our graduate students but to chair the doctoral theses of more than the number of those years. Most rewarding for me perhaps is the opportunity to work closely with so many assistants.

On this day in May, I have hosted a party to celebrate the achievements of some of our graduates. It has struck me then as it has in other occasions, that how many of our graduates were my assistants in one year or another. Some were with me for 3 or 4 years.
The celebration, which I have arranged in almost every year to follow the graduation ceremony, brings together the new graduates with some of their predecessors not only to celebrate their achievements but also to give them a taste of what await them out there. The celebration however could not be complete without my acknowledgment of the assistants’ contributions to my own scholarly achievements. Over so many years I have relied on them, worked with them and learned a great deal from them. Without the “assistant”, it would have been less pleasant for me to be my “own assistant”.
Rather than heaping on myself the praise for being their mentor and professor, I thought it is time for me, if not for all other who were privileged to have assistants to salute the “ASSISTANT”.

To all of you who worked with me as assistant at Clark University or elsewhere, I salute you. I pay you the highest regards one is able to convey. I wish you all the best.
As you depart and embark on your new carrier, remember the “Assistant”. One day you will be celebrating the “assistant’s” own accomplishments, but in doing so do not forget that in his celebration you are celebrating your own.
Good luck to the Assistant and to all graduates. Mille Merci.

The Financial Meltdown: Where were the Economists?

“Like a good novel, each phase in economic history has its villains, heroes, and defining moments. Often, it is only with hindsight that we can identify them” (Borio and Whiter, August 2003).

At The inaugural conference of the Mosakowski Institute for Public Enterprise, Clark University which took place on November 13-14, 2008, The Honorable Michel Dukakis, former Governor of Massachusetts and currently a professor of Political Science, Northeastern University, gave Clark University President’ lecture: “Reality based Leadership: Putting ideas into action”. Given that the conference theme was “University Research and the American Agenda: Discovering Knowledge, Enabling Leadership”, it was more than befitting to gain insight about leadership from someone who held a leadership position as the governor of Massachusetts for three terms.

The talk was thought provoking to put mildly. Addressing an audience of students, faculty, and administrators as well as invited conference participants, governor Dukakis spent the better part of his speech talking about his administration accomplishments. And, while doing so he saw fit to chastise the “Academy” for its complacency in addressing national needs, social as well as economics. He described the Academy’s activities as given rise to “national failure” along the line one may ascribe to the market the concept of market failure associated with public sector provision of the public good. He forcefully pointed out that the learning experience at US colleges and Universities neither prepares students to participate in the public sector arena, nor instruct them about issues that affect theirs and their fellow citizens’ lives. He reserved his harshest critique for universities’ researchers in general and economists in particular.

Alluding to the US ‘financial meltdown’ he asked: Where were the economists while the financial storm was brewing? How come that few if any saw it coming, or voiced any warning about the implications of the assets price bubbles on the real economy? Why did those economists outside of the “liberal” stream acquiesce with the hands off the market policy pursued by politicians and their appointees during the 8 years tenure of the Bush administration? The “invisible hand” of the market is now very visible, with a near collapse of the financial sector and a slowdown in economic activities mimicking that of the “Great Depression”.

This harsh critique is well earned. One need not agree with governor Dukakis harsh critique of the Academy to acknowledge the academic failure in not making the contributions’ of its members heard, and heard not by fellow colleagues and students but by the community at large. If there is a failure, it is not a failure in teaching or research but rather in dissemination. But dissemination of finding outside the university gates is costly, both in time and money. Communications have benefits as well as costs, and the market for dissemination of information is imperfect to say the least (more on that in a follow up blog).As an economists among others in the audience, although not particularly welcoming Governor Dukakis harsh critique of the Academy (his full remarks are posted at the Mosakowiski Institute web page), I appreciated the concern eloquently expressed for the social needs of those who have fallen out of the “social net”.

Without touting one’s horn, I have always believed and acted upon the view that education must serve the public as well as the private interest. Throughout my academic career I have been fortunate enough to carry out this task, not only as a member of the Academy but also as a participant in research institutions whose function is to disseminate information to a wide audience as well as participate if not shape debates about the nation, economic policy. Institutions like the Brookings Institution, the American Enterprise Institute are most often identified as the Academy where public debates on issues originate and information about policy impact is disseminated. Researchers in these institutions are members of those colleges and universities for whom the governor directed his criticism. The fact that faculty members do not run to the State House or the halls of Congress to testify does not mean that they do not contribute to shaping public policy or inform their fellow citizens about the merits as well as the pitfalls of such policies. One should not loose sight of the fact that the ‘Academy’ is the store of value as well as the generator of these values. A look at who is who in the public sector, how policy is formulated, aired out and sometimes “killed” paint the full picture of the Academy. Indeed today there are more institutes that you can count on hands and feet compared to forty years ago. Institutes have replaced the Academy narrowly defined as referring to colleges and universities as the instrument for effective engagement in public policy debates. This development for the most part reflects the cost of dissemination of knowledge, both the time is required for the activities and the money needed to for effective delivery. The new Mosakowski Institute is an example as to why only at that level a member of a college and or a university can be heard, as it reduces the personal cost of participation.

With my partial response to Governor Dukakis critique out of the way, a bit of economics is in order. Putting the current crisis in historical perspective, one need not go further than the Nixon era. During Nixon’s tenure (1968- 1974), the phrase was coined “we are all Keynesian now”. Keynesian economics was named after John Maynard Keynes’s The General Theory of Employment, Interest and Money (1936). The Great Depression of the 1930’s convinced the majority of economists that the emphasis on the efficiency of “unfettered” markets is misplaced. Keynes argued that the source of economic fluctuations is aggregate demand and that active stabilization policy—government tax reductions and spending increases, are needed to stabilize the economy.

In the 1960’s, there was near consensus about Keynesian economics. This consensus however faltered in 1970’s with the emergence of the “New Classical Macroeconomics”. The New Classical economists argued for replacing Keynesian economics with “Macroeconomics” theory based on market efficiency, and that it should be grounded in microeconomics, that economic agents (you and I and our company)act in the economy in our best interest i.e. optimize.

The new Classical Macroeconomics was challenged and a new stream of developed by a school of thought referred to as the “New Keynesians. The major tenets of the new theory are: that fluctuations in nominal variables like money supply influence real variables like GDP and, that economic fluctuations are the product of market imperfections such as wage and price rigidities. Theoretical developments about sources of fluctuations, how policy monetary and fiscal affect the real economy, whether governments should pursue active policy (manipulating monetary aggregates and budget posture) or follow passive policy, like Milton Friedman fixed 3% monetary rule or John Taylor interest rate rule, and so on . The macro economics landscape had become so convoluted that most economists especially those teaching the undergraduate macro, unable to inject all these new developments (often highly mathematical) in the course materials to explain the phenomenon of economic fluctuations. Those of us who taught graduate macro had to run not only to catch up with developments in the field but also to figure out which side of the debate one has to declare oneself. Macro economics was comingled with monetary economics, high power modeling and empirical analysis. The central issue of fluctuations was debated and what to do about it depended on the model of the time. In short macro economics lost its innocence. We needed to know a lot more than we did during the phase of Keynesian macro economics.

What implications had these developments for the conduct of policy? Most significant perhaps, are the proliferations of innovations that had taken place in the financial markets some of which have barely been digested in the literature and or in policy debates. Ideology about the efficiency of the market still remained supreme; hence a laissez faire attitude prevailed at least among many in the economic profession. Today financial woes may in part reflect unshaken faith in the superiority of market outcomes. What went wrong is a complicated and lengthy scenario that would require as big a volume as the General Theory (I am confident that some economist will come up with an opus magnum on it like the one by Friedman and Schwartz: Monetary History of the US).[1] For now, and to answer the question posed earlier: where were the economists, let me emphasize that they were there, perhaps more so in print than in any other media.

Since the mid 1990’s economists have written about changes in the macro economy, especially about changes in the monetary transmission mechanism and especially about financial innovations such as securitization, the rapid growth of derivative markets and financial liberalizations.(see Federal Reserve Bank of New York Conference on monetary transmission, April 5-6, 2001, also papers in the Federal Reserve Bank of Kansas City’s Symposium on Monetary policy and Uncertainty: Adapting to a changing Economy, August 28- 30, 2003) just to name a few. Several papers dealt with the impact of financial innovations on the real economy as well as the liberalizations on the financial sector in general and the banking sectors in particular. There were many warnings of about dangers ahead but went unheeded.

The paper by Borio and White “Whither Monetary and Financial Stability? The implications of Evolving Monetary Regimes” is of particular interest. The authors make the following points:

• Financial liberalization both within and across national borders which began in the mid 1970’s were virtually completed in 1990’s. For all intent and purposes, this produced a shift from a government-led to a market- led international financial system (p.140). The result is a rise in competitive pressures and easier access to external funding.
• Advances in information technologies led to a wider spectrum of tradable instruments, in particular the rapid development of derivatives markets facilitated by the unbundling of risk into its constituent components (p. 143).
• Increased focus of Central Banks on price stability. This shift implied a grater willing to accept volatility in short run interest rate.

Their conclusion in a nutshell is that: “changes in the financial and monetary regimes may have potentially increased the scope for financial imbalances to grow during expansionary phases. This makes the economy more vulnerable to boom and bust cycles (p.149). In a liberalized financial environment, the risk of episodes of financial instability is higher than in a more controlled system. The incidence of banking crisis was much more limited during the post war, a period where the financial system was much more regulated.

From the analysis they posit that: The policy challenge would be to put in place mutually supportive safeguards in the financial and monetary spheres to insure the necessary degree of financial and monetary stability.

With policy makers being hasty to rescue and bail out the financial sector and or the beleaguered auto industry, they should take a deep breath and see where their policies fit in light of the imposing changes in the financial structure and the transmission mechanism of monetary policy. They would do well to read Borio and White’s timely analysis.

One final note: Early on I have indicated that if there is a failure at the Academy it is in the transmission of the fruits of research. I believe this view is shared by many whose research is in the public interest yet it lacked public hearings. Good news on this front. A new publication in accessible format was launched October 2008: Economists Voice, www.bepress.com/ev. The objective is to make the economist’s views on current issues, events and policy heard in a format accessible to a wide audience I applaud this effort and hope that many members of the Academy follow suit.

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[1] Friedman & Schwartz, A Monetary History of The United States, 1867-1960. Princeton: Princeton University Press (for the National Bureau of Economic Research), 1963.

“No, No, We Won’t Go”: Why Some African Presidents Refuse to Retire.

The phrase “No, No, we won’t go” was chanted back in the 1960s. It came to mind as I read a piece in the Economist (March 15-17, 2008) about debates currently taking place in Cameroon on Presidential Term limits. The title of the piece is “Another President who won’t go” (p. 49-50). The Economist reported that on February 24th and 25th violent protests broke out in Douala, Cameroon commercial capital in response to Cameroon’s President, Paul Biya’s hint that “he might stay on for a third term of another seven years.” President Biya has presided over Cameroon for 25 years. A new constitution which came into force in 1996, limits the President to only two terms. For the 75 years old President “not to go”, the constitution will have to be changed to allow him to stay.

Aside from reporting about the Mayhem that followed the President’s hint and about the weakness of the opposition parties challenging the ruling party nothing is said to enlighten readers about why the President of Cameroon won’t go. This phenomenon is not endemic to Cameroon.[1] To understand this phenomenon, the hold on power, one has to put it in the proper context.

Old men of Africa, most of whom are in their late seventies or in their eighties have ruled for over two decades. Most of these Rulers have come to power on the heel of independence with the blessing of their citizens. Having one of their own with no clear tie and in opposition to the colonial power that ruled the country was hailed by one and all. Expectations ran high. Rulers and subjects had great hopes for their countries and at the beginning it looked that way. But then the hope dashed, the expectations were not fulfilled. What went wrong?

To be “scientific” one need to examine a country by country experience. This clearly is not the place. Two excellent books. “The Fate of Africa, From the Hopes of Freedom to the Heart of Despair: A History of 50 years of Independence” (2005) by Martin Meredith and “A Continent for the Taking: The Tragedy and Hope of Africa” (2004) by Howard W. French provide a clear picture and documentation of many a tragedy.

In this space what may be instructive is to show that the “hold” on power is to be expected. Data compiled by Banks[2] gives information on the ruler’s tenure for almost all countries in the world over the period 1815-1999. When this data is combined with the Freedom House rating of freedom over the period 1973-2006 (a range from 1 to 7: 1 is free and 7 is not free) a clear picture emerges. Consider the following nine African countries: Botswana, Cameroon, Ghana, Kenya, Mauritius, Mozambique, South Africa, Uganda and Zimbabwe. Botswana is rated as FREE with a score of 2.0; since 1980 it had two turnover of rulers. Cameroon has a rating of 6.0 (not free) with one turnover of power since 1980; Ghana gets the FREE label (score 1.5) with two turnover of tenure in 1981, 1984 although no change in tenure for 1990-1999. Kenya as classified as partly free with a score of (3.0) although it shows no change in tenure since 1978. Mauritius id FREE with 2.0 score and since 1980 had experienced two turnovers in rulers, in 1982 and in 1999. Mozambique is given the score of 3.5 as partly free with turnover in 1986, but no change in the period 1990-1999. South Africa gets a score of (2.0) with three turnovers over the period 1980-1999. Uganda is classified as partly free (4.5) with no turnover in ruler’s tenure over the period 1990-1999 although it shows four changes from 1980-1989. Zimbabwe had one change in 1980 and Mugabe’s tenure is 28 years and counting.

These examples highlight one of the fundamentals behind the “no go” phenomenon. FREEDOM with all its ramifications is the most significant factor in determining the staying power of a ruler. Freedom is much more than simply conducting an election. It involves the guarantee of political rights (electoral process, political pluralism, and participation) and civil liberties (free and independent media, freedom of assembly and open public discussion, rule of law and individual rights). Few of these rights have been met in many Sub-Saharan Africa countries despite the fact that elections are held, opposition parties participate but the outcome somehow is seen to be preordained. The present Ruler either “win” not “fairly” and squarely the opposition either attacked, silenced or jailed (see Howard French).

One needs to give details about what goes on before and during an election many African countries. There is a saying that “power corrupts”. This is true when one looks at executive tenure in undemocratic regimes as well as in some of the world democracies. The election for the office of President in the US, runs in the billions and more often than not it costs the contender millions of dollars in out-pocket, (not to mention the wear and tear the candidate undergo). Look no further than the rate of return on the investment reaped by Presidents and ex-Presidents. This return is much valued when a ruler is transformed from the status of an ordinary citizen with modest means to the status of a “mogul” with the nation’s wealth under his/her sole control. It is ironic that the Governors and ex-Governors would show no indignation at the outright “abuse” and “blunder” of the wealth by a ruler in a state where the phrase “no, no we won’t go” is heard. Exposing this abuse by insisting that the “net worth” of a ruler be revealed for his/her admission in the world community would go a long way in changing the behavior of those rulers who wouldn’t go.
[1] Remember what happened in the presidential election in Kenya and now it is Robert Mugabe of Zimbabwe to orchestrate a win in the run off election for President.
[2] Cross-National Time-Series Data Archive, Copyright (c) 2001 Arthur S. Banks.

The Biggest Dilemma: How to Reduce America Health Care Costs and “Ensure” An Affordable High Quality Health Care for All?

The Biggest Dilemma: How to Reduce America Health Care Costs and “Ensure” An Affordable High Quality Health Care for All?

This blog is not written to enter the debate currently been waged in the Presidential race between Senators Obama and Clinton about their respective health plans. Rather, the purpose is to raise some issues that have been overlooked in both plans.

The Obama webpage gives a well “researched” outline of his plan: “Barak Obama’s plan for A Healthy America” www.barakobama.com/issues/healthcare/ (number of pages 14). I say well researched judging by the number of references (65) used as documentation. To an economist’s eye, especially those of us who at one time or another engaged in research and analysis of the delivery of health care in the US and the UK, the piece is a scholarly one.[1]

The Clinton plan: “The American Health Choices Plan: Ensuring Quality, Affordable Health Care for All Americans,” (www.hillaryclinton.com/feature/healthcareplan/Americanhealthcarechoicesplan.pdp) is an 11- page write up with 21 references. But unlike the Obama’s plan, Clinton backs up some of the plan provisions with data supporting the financial needs for health reform (p.11). The estimates are welcomed not only because they make scrutiny of the plan easier but also they shed light on the credibility of the proposal. The plan gives detailed provisions that if implemented would secure for the American people the elusive universal coverage and the quality of care that we all hope for but we seldom encounter.

As both plans are accessible with a click of the mouse, I shall not reproduce here all of their features. What I will attempt to do is to put the main features of both plans in the context of the current status of American health care system and raise few questions that are left unanswered. Let me first begin with a few statistics. [2]
· The US spends some 2 trillion dollars per year on medical care (US Consensus Bureau Health 2007). This amounts to $6,644 per capita.
· There are 46 million Americans who lack health insurance coverage (of which 9.7 million are children) (National Health Expenditures 2007).
· Over the period 2000-2006 Health Insurance premiums have risen four times more than wages (Kaiser Family Foundation 2006).
· 90,000 Patients die from medical errors in hospitals every year.[3]
· Spending on preventative care amount to less than 4 percent of health care spending. (Lambrew, J.M. The Hamilton Project Brookings 2007).
· Administrative costs as a percent of medical expenditures amount to 27% of Medicare/Medicaid and 16% of private insurance (The Prometheus Fact book/Health use).
· One in six uninsured person lives in a family with an increase between $50,000 and $75,000 (Ibid).
· Per capita health care cost in the US is twice as high as that of Canada, France, and Japan and 2.6 times that in the UK (OECD Health Statistics).

These statistics paint a picture not unfamiliar to Americans. Almost every one knows that we spend a significant proportion of gross national income on medical care (14.44 % in 2007), that patients die in hospitals due to errors, that nursing homes residents are abused more often than not, that malpractice suits are prevalent and costly and that health insurance premiums, deductibles and the cost of drug therapy and testing are rising much faster than the core inflation rate and/or the wage rate. Yet, there has not been sufficient indignation over the status of the US health care system to compel policy makers to address rising cost, the lack of universal coverage and most of all the “quality” of health care. Some of this may be explained by the fact that physicians and patients as well as the public at large, for the most part are convinced that universal medical care coverage would lead to nationalization of the health care system (a la British and the Canadian systems), a system that would limit medical care resources and constraint patient choices.

In this election cycle, something seems to be happening on the health care front. Interest in the Presidential race, especially the selection of the Democratic Party nominee has opened a window for the candidates to press for universal health coverage. The hope is that voters’ interests in a candidate can propel him/her to secure their support for a universal health plan.

Since health care is at the top of the Democratic candidates agenda, let us focus on what they offer, what their plans have in common and where they differ.

· Coverage: expand insurance coverage to the uninsured. Private insurers would be required to offer policies to everyone, regardless of medical history.
· Choice: offer all Americans an enhanced choice in the selection of insurance coverage through a mix of private and public plans including the Federal Employees Health Benefit Program (FEHBP).
· Affordability: make insurance affordable to low-income Americans.
· Quality: improve quality through monitoring of services and modernizing the system.

These salient features notwithstanding the “devil” is in the details. Take coverage for example: Hillary Clinton envisages a system that offers coverage for all (universal coverage), achieved by mandating that everyone have insurance. The question of affordability comes later. Barack Obama does not see the need for mandates (although he mandates coverage for children) on the ground that by making the plan affordable, the uninsured will buy coverage. This clearly is a point of contention not only between the candidates but also among health economists (see Krugman, P., NY times, op. Ed. March 4, 2008). The bottom line seem to be: if you want universal coverage, mandates is the way to go. Making insurance affordable does not guarantee purchase.
The question that arises is: “if insurance is affordable, why wouldn’t the uninsured buy coverage?” The answer is simple. Why buy coverage if there is a “third party payer”. Currently some uninsured persons receive medical care through the “uncompensated care pool”. Insurance companies shift the cost of providing this care to those who buy insurance by raising their premium. The same is true for auto insurance (it is estimated that 14% of drivers do not buy insurance). Despite the mandates, most auto insurance plans include provisions (with additional premium) to cover damages by uninsured motorists. The bottom line then is that mandates may not assure universal coverage but it is likely to reduce the cost to third party payers compared with a plan without mandates.

Aside from mandates, Clinton envisages a health care system that is not too different from the existing system…a private/public system, although the plan may end up expanding the public component if many Americans (currently insured and the uninsured) move to opt for coverage under the Federal Employee Health Benefit plan (FEHBP).[4] The Obama plan favors a bigger role for the government in the medical care market through the creation of a “new public insurance program” offered to those who neither qualify for Medicaid or SCHI, nor covered by employers’ plans. His plan also calls for a “National Health Insurance Exchange.” This organization is envisaged to be a ‘watchdog’ for the private insurance market protecting those who want to buy. Insurance and facilitates enrollment in the newly established public plan.

Reading the lines and between the lines, it is clear that the Obama plan comes down on the side of public provision. The question is: will there be one public plan or several like those offered by FEHBP? And what agency will administer the plan? Will it be part of the HHS department or an independent agency? And what is the cost of administration and who bears the additional costs? Above all, why the need for a new public plan given that the Obama health plan also calls for extending FEHBP to non-government employees?

Two fundamental elements not adequately addressee in both Obama and Clinton plans had to do with “measurements of health outcomes” and the phenomenon of “cost shifting”. ‘Quality’ needs to be defined in terms of “long term outcomes” and in relation to cost, monetary and time costs across generations. In talking about quality neither plan gave adequate attention to patients “waiting time”, “quality of access” (which doctor, procedure or hospital), and to “medical errors” committed by physicians, radiologists and hospitals (even though some of these errors carry with them monetary payments through ‘malpractice suits’). What about access to catastrophic insurance and quality of access to nursing homes. Another related issue is the status of those covered by Medicare. Will Medicare subscribers have the option to opt out of Medicare (part B) and join another plan, especially in view of the fact that the Medicare premium paid is progressive (rises with income) and for most Medicare beneficiary private insurance is needed to supplement medical coverage?

We have gone down this road before (several reform proposals made in the 1980s and the 1990s). Two options are usually debated. Keeping the private/public mix but change this or that provision or junk the system and nationalize (one payer) medical care. Past experience suggests that a private/public system is the preferred system. Piece meal changes are the way to go. There is nothing wrong with this approach as long as the contemplated reform ushers in at least one improvement. No one denies that there are many elements that need fixing in the US Health care system. Let us hope that reforming America health care system gets a fair hearing and not falls by the wayside once the presidential election comes to a close.

[1] Ott A. and Gray W. The Massachusetts Health Pan: The Right Perception? (1988).
Ott A. Choice and Incentives in Health Care: A Comparison between the US and the UK (two conference papers, Institute for Economic Studies (IEPS), Clark University and the University of York, UK).
Ott and Lin J.H. Equality of Access to Health Care: A Comparison of the US and UK systems (1986), IEPS.
[2] Some of these Statistics are cited in Obama’s plan.
[3] As Dennis Cortes, President and CEO of Mayo Clinic puts it “this is the equivalent of two 747 planes crashing every two days”. Talk covered by CSPAN 2, March 21, 2008.
[4] Although FEHBP is a Federal government program, it does not entail public provision of services. FEHBP offers federal employees some 10 plans such as Blue Cross/Blue Shield with different levels of premiums, contributions, benefits and deductibles. It differs from private employers plans in the level of government contribution towards the purchase of the chosen plan. For details see: US Office of Personnel Management webpage.

Good News for Africa: Another Day, Another Gain

In my last blog “Why do Governments Engage in Mass Killing, February 18”, I wished Kenyans well in their strive for democracy and restoration of their faith in democracy. Wishes sometimes come true. The Wall Street Journal (Friday February 22), brought the good news.
According to the associated press: “Kenya’s government tentatively agreed to create a Prime Minister’s post to be filled by the opposition moving the East African country a step closer to ending weeks of deadly clashes over the disputed presidential election” (p. A8). In my piece, I wished for a sharing of power, which would ultimately lead to the restoration of the presidential office to the true winner. In the meantime, this sharing of power may be enough to assure Kenyan citizens that their democracy is not fragile, that it will endure. A sad note accompanying this good news, is that the ‘ethnic grievances and violence have left more than 1000 people dead”. Kenya violent conflict unfortunately, has put it in the book as given rise to Mass Killings (see http://attiatott.blogspot.com/ February 18, 2008 for definition of mass killing).
Over the past two years, we at the Institute for Economic Policy Studies have made efforts albeit modest, given our volunteerism efforts and our own resources (no outside support) to put forth the idea that developing ‘human resources’ should be at the forefront in the design, execution and funding for development. Education is and should be the building block for improving the economic conditions for the people. The development strategy often has been devoted to bricks and motors, not to human development or the right human development. It is not enough to throw money on education infrastructure (aside of the fact of being minuscule, compared to other infrastructures), rather it is much more important to ‘know’ how to make use of education infrastructure. Africa may surely lack education infrastructure but they surely have educators who can if challenged and channeled properly effect development.
The title of my piece today, Another Day, Another Gain was motivated by President Bush recent announcement. (Two Routes to Building Africa: Bush Visit (to Liberia) Emphasizes Human Development; Wall Street Journal, February 22, p.A8). US and Western powers are urged to focus more on human development. President Bush went further by announcing that the “US will provide one million text books for Liberia in the next year.” Clearly a step in the right direction. One may ask what text books and for what educational level: elementary, secondary or tertiary? The paper did not say. I am sure the details are now being worked out at the Agency for International Development.
It is a good step no matter what books or at what level. I have been taught that all books no matter how bad are good books in that they will make you think, they will make you see and feel what otherwise could not have been seen or felt and that what education is all about.
I have always wondered about what to do with the surplus of books many of us in Academia, especially those of us with long carriers, who will no longer have needs of these books. Even in the age of the internet there is still something about the wholesomeness of books. Hopefully, the President’s effort of building the reading capacity of Liberia’s people would extend beyond text books, and by opening the door for all who have books to channel these books to Africa would be users, he will indeed have succeeded in promoting knowledge, a vehicle often overlooked as the first building block for development.
Some of my former PhD students in Economics and myself are educators. We believe that education and the use of educators generated knowledge have been overlooked by development institutions, universities and donors. To that end, the Institute for Economic Policy Studies is sponsoring a conference to address this issue. We are encouraged by the President statements. Perhaps the day has finally come to put development on a sound footing.

Why do governments engage in civilian killings?

In a paper published in the Journal of Defense and Peace Economics (2008, vol. 19(2)) by colleague Sang Hoo Bae and Attiat F. Ott, we have investigated theoretically and empirically the predatory behavior of government: the case of mass killing. As such journal papers go; the model and the empirical analysis are not for general consumption. Nonetheless, the story it tells is not difficult to follow and the conclusions it arrives at is worth highlighting.
Before I summarize our findings, I need to acknowledge a contribution to this topic made by Hugo Slim in his book: Killing Civilians: Method, Madness and Morality of War (Colombia University Press, 2008), reviewed by the Economist (February 16th, 2008, p.92). Although I have yet to read the book, the Economist’s review touches on a few of the issues we have addressed on our paper on mass killing. Our findings may go some way to answer the basic question raised: why kill civilians? Let me begin by citing few relevant statistics.
In the 20th century there were 109.7 million civilian killings by the state. This amounted to 4.35% of world population. In the 19th century, these were 19.4 million deaths or 1.65% of the world population, an increase of over 500 percent. According to the World Development Report 2005, most of the violent conflicts leading to civilian killings took place in low income developing countries, with 38% of these taking place in Africa.
Violent conflicts leading to mass killings of civilians fall into three categories: military conflict between states; between states and non-state groups; and between factions within a state. When we talk about civil war we are referring to the third category commonly referred to as “intra state” war. In this type, either the state (government) or a rebel group is the initiator. Examples of civil war include Angola civil war lasting 27 years with more than one million deaths, repeated wars in Sri Lanka with 500,000 deaths, Rwanda with over a million death to name a few. Mr. Slim gave reasons for civilian death including “a desire to exterminate an entire group of purportedly inferior beings; a lust for power and domination, necessity or plunder”, (The Economist, p.92). A student of violent conflicts especially civil wars can find not one but many causes for killing civilians. Sang Hoo Bae and myself being economists, we explain mass killings by the state by modeling the choice of a ruler of a country in which there are two distinct groups of populations (divided along ethnic, religion or other elements) by characterizing the decision as a three stage process. We investigate the ruler’s (assumed belonging to one group) options: engage in mass killings of the other group (initiate civil war); resolve the conflict by forming a coalition government; or do nothing.
Think of the current civil war in Kenya that started following the December 27 presidential elections. The ruler, President Mawai Kibaki is said to have lost the election to the opposition but refused to relinquish to Daila Odinga the presidency. The ruler, Mawai Kibaki options are those we have investigated in our paper. Our model solves for the optimal choice. We show that which option the ruler will choose depends on the “probability to remain in office which is derived from his political power; on the expected wealth from attacking the opposition group and the cost of the attack.” The cost can be of two types: military expenditures and cost of outside sanctions. In the Kenyan case, the flurry of activities by outsiders (the non-state group) including the US secretary of state, the former UN Secretary General, Kofi Annan may raise the cost and might tilt the choice towards a coalition government.
Using data on civilian mass killings over the period 1816 – 1997, we attempted to identify those factors that accounted for the choice of the mass killing option. But what mass killing constitutes? And who compile the data? The data is derived from the Correlates of War (COW) project. COW gives information on conflicts with more than 1000 battle related deaths. In the conflict studies, 1000 battle related deaths have been taken to signify mass killing. In our study we use this number and also redo the statistical analysis with 10,000 battle related deaths as defining a mass killing episode.
The statistical results of testing our model for the civilian mass killing that occurred between 1816 and 1997 give insight into the question raised earlier: the ruler’s choice of mass killing or as a Mr. Slim has put it: why kill civilians? Our findings reveal that “the length of executive tenure (how long the ruler held the office) plays a very significant role in civil war killings. In addition, it identified ethnicity, as a contributing factor, in that the “more fragmented the population – many ethnic groups – the less likely is mass killing and vice versa”. The results that were not unexpected had to do with spending on the military conflict and the income of the country. High military spending increases the probability of killings; the second the higher the income of the country the less likely the ruler is to engage in civilian mass killing.
The civil war in Kenya will hopefully come to an end before it belongs to the COW records where the civilian death rate reaches 1000. It would be a tragedy not only for the civilian population who are paying a heavy price for democracy but also for the world at large. The international community should persuade, cajole even compensate (bribe?) the ruler to restore democracy by opting for the power sharing arrangement for a limited period (to save face) and to restore the presidential office to the opposition if it turned out that Mr. Odinga was indeed the true winner.