Regulation done right?

This story from Newsweek’s Fareed Zakaria, “The Canadian Solution,” is worth a read.  He notes that Canada has come through the financial crisis in quite good shape.

So what accounts for the genius of the Canadians? Common sense. Over the past 15 years, as the United States and Europe loosened regulations on their financial industries, the Canadians refused to follow suit, seeing the old rules as useful shock absorbers. Canadian banks are typically leveraged at 18 to 1—compared with U.S. banks at 26 to 1 and European banks at a frightening 61 to 1. Partly this reflects Canada’s more risk-averse business culture, but it is also a product of old-fashioned rules on banking.

While we may find the idea of regulation to be a necessary evil, it’s certainly worth studying what policies actually work reasonably well.  I log this under ‘sustainability’ as well, since it appears that the Canadian model banks will outlast ours!

I’m on the road for the next couple weeks, so probably light blog activity!

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Comments

  • Jim  On February 12, 2009 at 12:03 pm

    Interesting article, though I am taken aback at his implication that the Canadian health-care system is much better than ours – he does not say this directly but does point our the cost as % of GDP is 9.7 to 15.2 in the U.S. – and seems to think this is good. From what I read, the reason it is a smaller percentage is that the services are much less. The fact that they are “better on all major indexes” I would suggest is a demographic phenomenon. Simple logic tells me that spending a third less per capita will not give you a healthier population.

    But the major problem that he is comparing apples and oranges: The U.S. has 9.6 times the GDP (2007) and 9.1 times population (2009). The comparison is meaningless.

    Not that we shouldn’t understand their system and emulate things they do well, but my gut tells me this will not solve our problem!

  • Curt  On February 28, 2009 at 2:08 pm

    Not sure I follow your “simple logic” here – it seems to imply that spending more on health care will always lead to better results… which I don’t find a convincing line of argument. I think if the goal is a healthy population then we should measure and judge on that basis, rather than on expenditures. If you can achieve a ‘healthier’ outcome with lower expenditures, then I think it’s a double win.

    I’m also not sure that a comparison of Canada and the U.S. is “meaningless” – but I do agree there are issues around scale and composition of the population which are important to consider.

  • Jim  On March 1, 2009 at 12:26 pm

    I think I am too aggressive with my adjectives in an attempt to quickly reach clarity. My implication is not that if you spend more you get better health care although I think in general that would be true – don’t you? – we are only talking about a specific set of data so my comments only apply to that data.

    We spend 1/3 more per person on healthcare. Now I am the first to say that a lot of that is waste and only supports health elites and doctors in the style to which they have become accustomed, but not 1/3!

    Therefore, if you believe this, we spend more per person than Canada on direct medical procedures, and, again, simple logic tells me that in general we should be healthier. Again, demographics play an awfully large part in health statistics.

    You note I qualifies “meaningless” in my last paragraph by saying we should certainly watch what Canada does and emulate the positive things.

    “I think if the goal is a healthy population then we should measure and judge on that basis,..”: This to me is quite dangerous logic.

    For instance, female cervix cancer in Thailand is 1/4th the U.S. rate. Shall we duplicate their methodology and infrastructure to lower our rate? No – it is most likely a demographic phenomena!

    Point is there are lies, black lies, and statistics (this is a paraphrase of some insightful person) and basing our healthcare on the Canadian statistics would not be good!

  • Curt  On March 1, 2009 at 7:14 pm

    I think health care is a tricky subject, and I think there are many angles to it. So let’s look at a few specifics, and see where it takes us.

    Spending more makes us healthier? In some situations, undoubtedly, but in others its very questionable… For example, spending on basic innoculations and things like that are almost certainly helpful. Spending extra for the best surgeon in a specialty may well be worth it.

    But how about the current situation with diabetes? Here are some stats from diabetes.org:

    – The total annual economic cost of diabetes in 2007 was estimated to be $174 billion. Medical expenditures totaled $116 billion and were comprised of $27 billion for diabetes care, $58 billion for chronic diabetes-related complications, and $31 billion for excess general medical costs. Indirect costs resulting from increased absenteeism, reduced productivity, disease-related unemployment disability, and loss of productive capacity due to early mortality totaled $58 billion. This is an increase of $42 billion since 2002. This 32% increase means the dollar amount has risen over $8 billion more each year.
    – The 2007 per capita annual costs of health care for people with diabetes is $11,744 a year, of which $6,649 (57%) is attributed to diabetes.
    – One out of every five health care dollars is spent caring for someone with diagnosed diabetes, while one in ten health care dollars is attributed to diabetes.

    I’d say this is not evidence of increasing health! The next question is why the increase here? I’m guessing it’s a combination of genetic factors, eating habits, lifestyle habits, and probably other things. To the extent that education and preventative measures could reduce the incidence of diabetes, then I think that type of spending would indeed be a step in the healthy direction.

    I agree with you that it’s not appropriate to simply apply methods from other countries – we need to understand the reasons why things are happening (which is surely easier said than done), and try to figure out culturally what will work best for us, given our diverse population and traditions. But I do think the baseline should be oriented toward ‘healthy outcomes’ – isn’t that what we want to achieve?

  • Jim  On March 2, 2009 at 9:47 am

    I think we agree on the goals. How to get there is another subject.

    Government trying to adminster our healthcare will be a disaster. It is only proposed as a pander to the lower income population. Do you agree?

    No one in the United States is without healthcare. Only without healthcare insurance, and generally by their own decision. Do you agree?

    Let’s get government out of the way and let the market work. Quality would increase; costs would drop; and no one would lose healthcare!

    Remember Manhattan! If they couldn’t do this – then they certainly couldn’t administer healthcare, which is much more complex! Or perhaps you think the government could supply all goods and services to Manhattan more efficiently?

  • Curt  On March 2, 2009 at 4:25 pm

    I feel far from qualified in trying to figure out or recommend solutions here, to be honest. There are a couple principles that I think are worth following, but the devil’s in the details, as always.

    1. Set up a system where people pay more of their own ‘normal’ healthcare costs, rather than having them mostly covered by insurance (when they have it). This will of course not be popular! But I suspect it would drive down costs.
    2. Set up a universal system of catastrophic health insurance (universal in order to keep premium costs down).

  • Jim  On March 3, 2009 at 10:15 am

    #1 will never happen with the Dems, and probably never with the Republicans – but I think you should change parties to get closer to the probability it could happen!

    #2: I believe catastrophic health insurance would exist at a very affordable rate if 1) the government would not be in the middle of healthcare and 2) if the government (society) preached a little self responsibility and then saw that catastrophic health insurance was offered by insurance companies through market incentives, etc.

    I guess I feel taking away self responsibility is just a bad way to go!

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