Is the Medical Profession Recession-Proof?

There have been a variety of news articles about the possible recession that we are in and how it is affecting every industry. Airlines, transportation, and shipping are obvious industries that continue to be affected. But what about the medical profession?

One longstanding belief about medicine is that it is a recession-proof industry. While our friends in business, real estate, and corporate life are all making their riches and buying their bigger and better homes, many physicians are still in medical school, training, or fellowship. At the end of this training the income finally starts rolling in just in time to start paying down those loans.

When a recession comes, medicine, for the most part, is relatively insulated from the downturn. While our friends in corporate life and business are bearing down for the tough times, physicians typically go about their business as usual. Granted, most physicians are not completely insulated because their investments are all at risk during a recession. However, the disposable income usually does not change much.

Of course, this can differ among specialties. Doctors involved in the cosmetic industry, such as plastic surgeons or dermatologists, are more likely to be affected as their clientèle typically pay out of pocket for their procedures and treatments. Other specialists typically continue to have good business – people continue to get sick, need their heart bypass surgeries, need their cancer removed, and need to be taken care of acutely.

One of the main reasons for this insulation is that the medical industry has a rare economic model in that the consumer (the patient) is not the payer (the insurance company). To make matters even more complicated, the provider (the doctor) actually tells you what you need. It is kind of like the patient is a child and the insurance company is a parent. The doctor is the toy store telling the child what toys he needs to be happy. Thus if you let a child loose in the toy store he will usually walk out with lots of toys that his parents paid for. And the toy store continues to make out fine.

Maybe that analogy sounds a little strange. The truth is that the medical industry is largely recession-proof because patients continue to get sick. Additionally, doctors continue to mandate that their patients receive good treatments and procedures, regardless of their cost.

International Working Patterns, Part I: Is it OK to Leave Work Before Your Boss?

Recent international studies have highlighted considerable variations in hours of work between countries as well as the high percentage of people who are working excessively long hours.

As demographic changes bring about the aging of populations in most developed countries, employers will increasingly come under pressure to offer terms and conditions of employment that meet worker preferences. One of these preferences is for shorter working hours – studies conducted in the late 1990s revealed that around 50% of workers in Europe and the U.S. would like to work fewer hours, and a 2006 study of 16 European countries found that employees wanted to reduce their average working hours by 3.7 to 34 hours. There has been a decline in working hours in many countries in the past few decades. But this has slowed in recent years, and there have even been recent increases in average working hours in a few countries including the U.S. and Sweden.

The Numbers

Among OECD (Organisation for Economic Co-operation and Development) countries for which working time data from 2006 are available, South Korea stands out as having by far the longest average weekly working hours, at 48.8, followed by Greece with average weekly hours of 43.2. In contrast, the Netherlands had the lowest average working week at 30.7 hours, followed by Norway at 33.8 hours. Most Western European countries had average weekly working hours of between 36 and 38.

Average annual hours are sometimes regarded as a more reliable comparative measure of working time since these take into account differences in paid leave provision between countries. On this measure, South Korea again ranked most highly among OECD countries with an average of 2,305 hours. The U.S., which ranked sixth out of 27 OECD countries, had the highest average annual working hours of all western countries at 1,804, while Japan came in ninth with 1,784 hours, Canada thirteenth with 1,738 hours and the UK sixteenth with 1,669 hours.

Of course, average figures often conceal wide variations in average hours worked within individual countries. According to a recent International Labour Organization (ILO) report, more than a fifth of all workers globally, or over 600 million workers, are regularly working more than 48 hours a week either because of their own financial need or the demands of their employers. Peru and South Korea were the countries with the highest rates of long-hours working – around half of all workers in these two countries were working in excess of 48 hours per week. Among developed countries, the UK was reported to have the highest percentage of workers working more than 48 hours a week, at 25.7%, while the corresponding figure for the U.S. was 18.1%.

What is becoming more common is for employers to allow their workers more flexibility in the times at which they start and finish work within a specified range of core working hours. A recent U.S. study reported that more than 42% of employees can choose their own working hours within a specified range of core working time, representing an increase from 29% in 1992. Within the EU, it is reported that around a quarter of employees have some flexibility in their hours of work.

Laws and Customs

Average working hours in different countries are influenced by a number of factors including employment legislation, collective agreements and cultural traditions. For example, the relatively low average hours worked in many Western European countries and the small range of variation between them can be largely attributed to the impact of the EU Working Time Directive (1993) which imposed a maximum 48-hour working week and mandatory rest and leave periods and to the extensive use of collective agreements in European workplaces. The longer hours worked in the UK compared with many other European countries reflects the fairly low coverage of collective agreements there. South Korea, where working hours are longest, is an example of a country where cultural traditions are very influential, especially the authoritarian work culture in which it is unacceptable to leave the workplace before one’s boss.

Working time legislation has been used in the past as an economic policy tool to tackle unemployment and boost economic growth, notably by France where a 35-hour maximum working week law was passed in 2000. The rationale behind this was that working time restrictions would encourage employers to create additional jobs to meet their operational needs and boost output. However, there is little evidence that working time restrictions have any impact on unemployment and economic growth; some researchers have explained this in terms of the unknown relationship between working hours and work effort or the question of whether worker productivity is higher when hours of work are shorter.

Some observers have linked the higher productivity increases experienced by the U.S. compared with other developed countries in recent years to long working hours. Yet there is no clear association between productivity and average working hours either: for example, in a study of the Group of Eight (G8) nations, although the U.S. was ranked most highly in terms of productivity, it was followed by France, where average working hours are significantly lower.

Part II, to be published tomorrow, will examine trends and international differences in the use of non-standard working arrangements such as part-time and temporary work and fixed-term contracts.

Regulating Sovereign Wealth Funds: A Double-Edged Sword

The present credit crisis in the United States has resulted in some sovereign wealth funds picking up stakes in U.S. companies. Sovereign wealth funds are investment funds owned by national governments. These funds are generally well armed with cash but very secretive. There is no uniformity among the sovereign wealth funds that are investing in the United States. Their disclosure standards vary widely. While certain funds publish their portfolio holdings regularly, certain funds refuse to disclose even the assets they manage.

More than 20 countries have set up sovereign wealth funds while a dozen more have expressed interest in establishing them. More than half of these assets are in the hands of countries that export a significant amount of oil and gas. The total value of debt and equity securities denominated in U.S. dollars is expected to be more than $50 trillion.

The secretive nature of these sovereign wealth funds has now given rise to fears that their investments have ulterior political motives. With more than $200 billion in bad debts, these investments are at the moment welcomed by many. Due to their rapid growth, there is now an increasing demand for regulating the investment by sovereign funds.

The Abu Dhabi International Authority recently invested $7.6 billion for a 4.9% stake in Citigroup which was reeling under the effects of bad loans to the housing sector. This investment provided a lifeline to the world’s biggest financial services group.

The key question is: Is a sovereign wealth fund different from an ordinary market participant? Sovereign wealth funds are owned by national governments. Governments can explicitly use their financial holdings in order to maximize ulterior goals. If a government has huge holdings of U.S. government bonds in their reverse portfolio, it can trigger a crisis in the U.S. bond market by dumping those bonds. The prospect of a foreign government owning a large fraction of our government bonds is less benign than it used to be.

The need for such investment in the U.S. is much more than the need for the sovereign wealth funds to invest their money. The main fear is that these funds are politically motivated and foreign governments, including some not very friendly ones, may gain access to U.S. technology.

It will not be an easy take to regulate wealth sovereign funds. If one country does not want sovereign funds, there are others who will welcome them. Many sovereign wealth funds may just turn their backs on countries that try to regulate them.

Attempts to regulate sovereign wealth funds may be seen as protectionism and chill the climate for foreign investment in the U.S. as the global economy slows down. Instead the U.S. government must take steps to ensure that the sovereign wealth funds remain a positive influence.

Sovereign wealth funds are not going away, and it will be increasingly necessary to work to integrate these funds as smoothly as possible into the financial system.

Keeping Up with the Jetsons

In about 10 years we could all feel a little closer, technologically speaking, to George Jetson. Although our cars probably won’t be flying, they could be driving themselves. In June 2008, Carnegie Mellon University issued a press release stating that their robotics institute had just received a $5 million grant from General Motors. This money will be used to continue one of the institute’s main projects: autonomous cars. According to Dr. Raj Rajkumar, who is the co-director of the project, the technology for driverless cars could be available to the public in as little as 10 years with the cars themselves available by 2030.

On November 3, 2007, DARPA sponsored a race between autonomous cars developed by 11 different groups. DARPA’s Grand Challenge website has stated that 89 teams applied to race, 35 passed DARPA’s initial tests and 11 were allowed to compete in the final event. “Boss”, an SUV entered by Rajkumar’s associates, Tartan Racing, finished first and won $2 million. The mission was for each car to not only cross the finish line but to also stop at pre-set checkpoints. Since half of the race was off-road, each car was given a GPS map of the 55-mile course 24 hours in advance. This gave scientists 24 hours to upload the map to the car. However, the positions of the checkpoints were only provided five minutes before the race began. Using 19 sensors, 2-D and 3-D lasers, cameras and short and long range radar, Boss was able to stop at each checkpoint and ultimately win the race.

Fortunately, Rajkumar believes a “hybrid or fully electric vehicle would be [an] ideal” platform to build autonomous cars upon since they have a built-in power source. This could be used to run the accoutrements used to drive the car. While Boss required an extra generator to power the various sensors, lasers and cameras, the new model is based on a Chevrolet Tahoe hybrid which extinguishes this need. Boss was also outfitted with bulky sensors and attachments around the top of the frame; future models are intended to have scaled down versions which can be hidden in the front and rear bumpers as well as the head and tail lights. Rajkumar expects some of the technology to be integrated into current cars in as little as five years. Cameras and lasers could be incorporated to sense when a driver is drifting off-road, if a car is hiding in a blind spot or to quickly slow down if a car ahead brakes suddenly.

Many social and financial benefits could come from the general acceptance of autonomous cars. For example, the elderly could be driven anywhere they wish without having to depend on others or their eyesight after dark. Children could automatically be driven to school with the push of a button, leaving parents free to go to work. Since cars would be controlled by a computer and not manually, accidents would decrease. According to the National Highway Traffic Safety Administration (NHTSA), there were almost 43,000 deaths from roughly 6 million car accidents in 2006. The National Center for Statistics and Analysis has reported that in 2005, car accidents were the leading cause of death for Americans ages 4 to 34. Rajkumar anticipates that the number of deaths could be lowered by 1 to 2 orders of magnitude to 430-4,300 deaths per year. This dramatic decrease would be due to the fact that computers do not get drunk, angry, fall asleep or commit human errors. The vehicle would always be fully aware. This would be positive for the overall economy since the NHTSA estimated in 2000 that $230.6 billion was spent every year due to car crashes. Of this, $977,000 was spent for each fatality and $1.1 million was spent on injured victims. If the number of accidents decrease, then it would follow that insurance rates would as well. Since insurance rates are based on how many accidents a type of car has, insurance for automated cars would have to be significantly less than for a manually operated one.

This is not to say that there may not be problems with such a car. Problems could arise if the car’s computer were “hacked” into or if the computer shorted out. If either of these were to happen, the consequences could be serious. Rajkumar believes the safety systems involved in autonomous cars would prevent either of these from being a problem. “Serious and secure safety mechanisms” would be built into the car to prevent others from accessing the computer. He doesn’t foresee problems being any worse than they are today. As for internal computer problems, there would be “multiple stages of operation.” If the computer were to go down, a backup would take over so fluidly, the driver would probably never know there was a problem. This is considered stage one. At stage two, the car would go into a more degraded operation or “limp home” mode. Stage three would allow the car to slow down, pull over to the side and call for help. The car itself would know if something was wrong and initiate the appropriate backup system.

Rajkumar believes GM will be one of the first manufacturers to begin production of these cars. “GM is our biggest partner and funding [organization],” he says. GM is even funding a second lab to continue such research to perfect the technology. However, anyone who watches the BBC’s top rated car show Top Gear will have already seen an autonomous car in action. Made by BMW, this experimental car flew around the racetrack while a nervous Jeremy Clarkson sat passively in the driver’s seat. Regardless of who produces the car first for the general populace, it is certain that this type of technology could shift how we think of driving and how much we pay individually and as a society for it.

Can We Let Go of this Gold Standard Nonsense Already?

This being one of my first posts on Amateur Economists I initially thought I would do an introduction. But then I happened on The Huffington Post article National Review Blogger Terrified Of New Five-Dollar Bill and it got my goat enough to change topics. They quote Mark Krikorian in his blog post at the National Review:

“Paper money has no intrinsic value, it can’t be redeemed for gold or silver, you can’t even make jewelry out of it. There’s nothing behind it but the people’s confidence in it, and when the government keeps changing its appearance, as it has with the successive redesigns over the past several years, that confidence is undermined.”

This argument has been made since long before we went off the gold standard, though if you write for the New York Post you don’t know this happened 75 years ago. Gold is an abysmal backer of money. It is ridiculously economically ignorant to think that any major economy today could operate smoothly on a gold standard. The price of gold has more than tripled in less than a decade. Seriously, what would the price of gold be if all the world’s major countries were hoarding enough gold to back their currencies?

The Wikipedia entry on the gold standard lists a number of disadvantages with using gold to back currency. However, these are no longer disadvantages but rather reasons why gold can no longer function in this manner. First off it states that there isn’t enough gold. I want to point out that this particular argument is incorrect. So long as the price of gold is allowed to fluctuate in a free market it would simply rise in price such that a dollar would be backed by a smaller amount of gold as the price rises. But if the value of gold is managed, then who gets to manage it and how should it be managed? If we are to manage the value of gold, then we might as well just manage the value of the paper money, which is one reason countries dropped the standard in the first place.

Perhaps the greatest problem, however, which is missed entirely, is that in order for it to work every country we trade with must be on the same standard and share a common value for gold. If the value of paper currency is tied to the value of gold and one country has no gold, then their currency is worthless and they cannot buy goods from our country. With a gold standard there has to be a conversion to gold associated with any transaction across countries on different currencies. Otherwise, we’re reduced to an inefficient barter system.

Scapegoating: The Last American Growth Industry

Recently I read a disturbing article by a young South Carolina mother entitled “A Letter to Illegal Mexican Walmart Shoppers.” (Editor’s note: the article’s original URL no longer exists. Click here to read it from Google’s cached pages.) The gist of the letter is that, in this woman’s opinion, Mexican Walmart shoppers are rude, and most of the men want her bodies. And since they are single-handedly ruining America by taking our jobs, she feels they could at least be polite and stop leering at her.

What I find both refreshing and maddening about this letter is its open and unapologetic racism combined with a total lack of appreciation for the irony of the author’s position. Most Americans are a little more guarded in expressing their racism these days, even when they share the same views. But in South Carolina it is apparently open season on Mexican immigrants, and they darn well better keep their hands off our white women if they want to keep shopping at Walmart!


It’s refreshing to get this blind hatred out into the light where we can at least see it, and I thank the author for doing that. Usually this stuff breeds in the dark. If everyone who thought these things said them out loud right away, we could then discuss them on the spot and dispel a lot of ignorance. Discussion would be a good thing. Sadly, we rarely get the chance to take it that far.

The irony of course is that no one promotes cheap labor and abusive labor prices as ruthlessly and effectively as Walmart. Those low, low prices come at the cost of American jobs, and you don’t have to be an economist to see that. The $19.95 CD player you picked up on sale under the ubiquitous smiley face was almost certainly made by Chinese workers who earn less than the cost of the item itself for an entire week’s work. Recently Walmart lost a lawsuit brought against it by its own employees for not providing them with legally required work breaks and for forcing them to work off the clock on pain of losing their jobs.

So clearly, the easier and more rational way to avoid being annoyed by Mexican immigrants at Walmart is to stop shopping at Walmart, but the problem is that many Americans have come to believe it is their God-given right to get the cheapest prices available on earth and damn the consequences. They shouldn’t have to think when they shop. They should just be able to consume at the pace they have grown accustomed to, regardless of economic conditions. That’s what we are after all; we’re consumers, right? We have to be able to consume things, and cheaply. It’s the American way.

Corporate responsibility is not a concept many American consumers understand or want to understand. And yet, somebody has to be blamed for the inconveniences in their personal lives. Mexican immigrants as a group do fit the bill. They don’t or won’t speak English, so it’s easy to blame them. (No back talk, except from people like me).

This is how scapegoats are born, and our country can’t keep functioning the way it is now without them. That’s what I want to focus on here:

Our country can’t keep functioning this way without scapegoats.

I want to focus on this because it has come to the attention of even oblivious Walmart shoppers that our country currently isn’t functioning very well. I think it’s not an exaggeration to say that our country has, in fact, become dysfunctional. In order to stay dysfunctional, we have to manufacture targets of blame for the obvious and growing problems we face: We need scapegoats. Without scapegoats, we’d have to look at the real, complex causes of our current problems, and if we do that, everything will change. Scapegoats help us to maintain the status quo, no matter how much the status quo stinks.

Like the saying goes, better the devil you know.

So, here for your shopping pleasure is a short list of some of the hottest and cheapest scapegoats around right now. Grab one while you still can! (I’m reasonably certain all of them can be found at Walmart.)

Mexican immigrants. They’re taking our jobs and ruining our country. Great jobs Americans would love to do like picking tobacco or working in slaughterhouses or roofing suburban homes in the dead heat of summer at sub-minimum wage. Let’s get serious for a minute here: Jobs that pay wages Americans can actually live on are not being snapped up by illegal immigrants. Those good jobs are going overseas to China and India. So blame your bad luck on Mexicans if you want to, while you can. Soon, however, there won’t be any good jobs for people born here, at which point you will have to be a little nicer if you want to get hired to pick tomatoes with these folks.

Married gays. It’s not the fact that the American auto industry is DOA or that the price of gasoline is on its way to Mars or that we are dumping enormous sums of money into a war we can’t win that is hurting our country’s economy right now; it’s those pesky homosexuals, always out in public doing pesky gay things like picking out drapes and going to the gym. Now they want to get married. No wonder we are doomed. God will now smite us with forest fires, tornadoes, hurricanes, and gay divorce lawyers. Hard to believe that the last election was largely won by simply invoking the power of homophobia, but it was. All of you people who voted for George Bush just so Adam and Steve wouldn’t get a marriage license, how is that working out for you now? (And by the way, Adam and Steve? Yeah, you two, out in California? Congratulations! High five!)

Stupid poor people. As you probably point out constantly to everyone you know, America is crawling with people who are way stupider than you. If those people sign papers with predatory lenders that take all their money and then repo their homes, it’s their own damn fault. Doesn’t matter if they are in their 90s and live on an $800 a month Social Security check, they should have planned better when they were younger. Now they are bringing down the whole country with their stupid stupidity by way of too many foreclosures. Alleged fraud and book-cooking at Fannie Mae or Countrywide is beside the point. Those nice, ambitious young brokers who invented ways to package and trade mortgage loans as securities, ways that completely erased who held the bad debts? Those nice boys were just trying help your stock portfolio increase in value.

We should never blame Wall Street or the finance industry for their own disasters because the market is self-regulating. Ronald Reagan said so and ever since then this is the official prayer of all rich people. High rolling high finance=good. Stupid poor people=bad. Always remember that every advantage in your own life was won solely through your own efforts with no help from anyone, ever, and every disadvantage of poverty is due to the stupidity and laziness of poor people. Keep thinking that way, and pay no attention to that self-portrait hanging in your den that for some reason is aging rapidly and taking on the visage of a depraved, self-indulgent monster. Oh yes, and hang onto your money. Tight. It’s yours, all yours.

Negroes. Come on, can’t you do any better than that? If you are still holding onto this one, you are probably over 80 and aren’t reading this anyway, and you may not have even noticed that a black guy is currently running for president. Speaking of that guy, lots of working class people, especially working class white guys, are uncomfortable with this candidate’s inexperience at this critical time in our nation’s history. It’s nothing to do with his race at all; it’s his inexperience. Uh-huh. Where was all your concern when George Herbert Walker Bush’s prodigal son wanted to be President? You know which son I mean: the same son that ran every thing he ever touched right into the ground, including oil companies gifted to him by Pappy’s friends, companies that were practically fool-proof money makers, and the entire state of Texas. Where was all your concern back then? Honestly, you guys aren’t fooling anybody.

That’s my short list. I know it could be longer but I have to end this rant somewhere.

The truth is, we have serious problems that will take a degree of unity to solve that we haven’t seen in this country in my entire lifetime. We just can’t afford to tear at each other when we are losing our place as a world power and endangering the whole planet with our waste and pollution. We have to look at the problems themselves and start producing products and services, not scapegoats.

Once upon a time, long ago and for a brief but shining period, we were more than consumers. We were merchants, craftsmen, workers, artists, and builders.

Wouldn’t it be great to get back to that time before it’s too late?