Market Power

Another Year, Another Flu Shot Shortage

Due to regulation and the market power of governments in buying flu shots, much of the profiitability has been taken out of the flu vaccine industry, leaving consumers of flu shots in the US market to rely heavily on a few manufacturers.  One of those manufacturers is Chiron.  The cause of last year' flu shot shortage was due to problems experienced at Chiron.

It's another year and we have another supply disruption due to problems at Chiron's Liverpool (England) plant:

Delays in the distribution of influenza vaccine made by Chiron are leading to spot shortages and complaints by doctors and clinics who may not get their doses for a while longer.

...  Production for this year was delayed because Chiron had to make changes to fix those problems. The company says it will have shipped 5 million doses by today but will not say how many it will produce this season. The other three makers of flu vaccine for the U.S. market have shipped more than 54 million doses, according to press releases and data from the Centers for Disease Control.

The problem that arose last year was due to sterility issues in Chiron's production process.  Now, we'd rather not have our vaccines produced in an unsterile environment.  But then again, we'd also like to have flu vaccines. 

In a more competitive market, there are other companies who are flexible enough to take up the slack when one firm goes down.  Not only this, the competition puts added discipline on firms to not let supply disruptions happen in the first place.  After all, if you mess up and can't take care of your customers, somebody else will.

Here is some more on the recent problems.  Aventis Pasteur is another primary supplier to the US market.

My Halloween Costume

When people ask me what I do for a living, I tell them I teach at the local university.  Most think that's cool.  Then they ask me what I teach.  When I tell them I teach econ, I often get a response not unlike that elicited by a rotten egg.

Ew.

Alternatively, if the person seems to be of good humor, I'll tell him/her that I put 20 year-olds to sleep.

On that note, I think that for Halloween, I'll dress up as a giant specimen of this.

A Good Old-fashioned Butt Kicking

From row 69 in section 48 of KU's memorial stadium (the very back row) I got to see the annual butt-kicking of the Missouri Tigers by the Kansas Jayhawks yesterday.  As effective as QB Brad Smith was last week in totalling nearly 500 yards of offense against Nebraska, he was ineffective as the Tigers were held to less than 200 yards of offense and just over 20 yards in rushing.  To put it plainly, the Kansas defense was IMPRESSIVE.  They were fast, they were disciplined, and they tackled well.

Missouri, as has been the case under coach Gary Pinkel, played the most important game of the year to most Mizzou fans with the emotion of a businessman.  That's fine, if your goal is to not pay taxes.  But against KU, he needs to get his players to play with a little fire.  And he also needs to get a little creative.  According to Jason Whitlock:

“I was so worried about this game,” a Kansas assistant coach told me after Kansas’ highly predictable 13-3 victory. “We were up all week thinking about trick plays they could do when they put those two quarterbacks on the field. We came up with like 16 plays. They didn’t do anything. It was unbelievable.”

It certainly is believable, if you've watched this program under Pinkel.  They pull out all the stops against stalwart foes like Arkansas State, then play not to win against teams like KU.

Funny opposing fan comment of the day:  I traveled to the game with friends from Missouri, a husband, wife, and their 3 year old son.  The son (and I ) were wearing our Brad Smith #16 jerseys.  We walked by a set of KU fans who were, well, imbibing before the game, and one of them pointed and hollered at the child "Hey!  That's child abuse to let him wear a shirt like that!"

Take your medicine part of the day:  I parked in front of the KC Masterpiece in Overland Park.  When my friends dropped me off after the game, a KU fan (in a black SUV {I think he is a secret Mizzou fan}) drove by.  When he spotted me, he hollered "GO KU! Wooooo!"  I just looked away.  What else could I do?

As he pulled out of the parking lot, he let me have it again.  "KU RULES!   WOOOOO!"  And as he pulled away on Metcalf, he gave me one last WOOOOOO!!!

I feel very sorry for the MU fans who live in KC who will have to put up with that sort of abuse for at least the next 3 months.

Oh yeah, KU also beat Mizzou in women's soccer and in women's swimming and diving this weekend.

Congratualtions, Again, To Carl Edwards

For those relatively new to this blog, Carl Edwards was a student of mine when I was a TA at the University of Missouri.  Carl is now tearing it up in NASCAR's Busch and Nextel circuit.  Today, he got his 3rd win this year, coming in first at Atlanta Motor Speedway, the second time he's won at Atlanta.  Carl, in his first full seasons in both circuits, is in 4th place in the Nextel Cup standings and in 3rd in the Busch standings.  That's not bad for a rookie.

Paying for Second Ultrasounds

Brian Ferguson points us to this article from The Scotsman on "expectant mums" buying ultrasounds with their own cash:

HUNDREDS of expectant mothers are going private to get second ultrasound scans in the Capital despite a Government watchdog saying they should get them free on the NHS.

... Edinburgh East and Musselburgh MSP Susan Deacon said she was concerned that women in the Lothians were not receiving the same care as elsewhere. She added: "I was very encouraged that the NHS QIS report recognised the clinical basis for offering the scans routinely. That change doesn't come overnight . . . but I think it's a matter of concern that, some considerable time after the report, there are still women who do not have access to this check."

Brian points out, among other things, that while many of the conditions that a second scan can detect are terrible conditions, the chances that a second scan will detect them when a first scan did not is negligible.  But with requirements that the public pay for second scans, more expectant mums will seek to have them.

It's very difficult to control the costs of health care in a public health care system.  On the demand side, I like the analogy of friends having dinner at a restaurant.  If the patrons decide that they will split the bill evenly, then each has a tendency to order more expensive items and/or more items than each would if he agreed to cover his own bill.  If this were to happen marketwide, we'd see higher prices due to the increased demand.  The same thing works in the market for health care.

On the supply side, health care providers face much more public scrutiny of their operations which limits their ability to respond to what consumers want.  In other words, the ability of suppliers to respond efficiently to increased demand is restricted, further pressuring prices.

In closing, Brian notes what will happen in a competitive market for health care:

Meanwhile, the service is available privately. There is at present only one provider, but demand for the service is growing rapidly. In the short run that'll push its price up, but the resultant profit will lead to the entry of other providers (it always does when there's profit to be made). Those providers will make their own decisions about buying capital and hiring labour, and they'll make those decisions rapidly because if they work to a government timetable, someone else will get in first and scoop the pool. And as new suppliers enter the price of the service will be driven down. Because competition always does that.

And what exactly is wrong with that?

Nothing.

Bye Bye Tamiflu?

Plainly and simply, Kip Esquire gets it.

Those Scallawags!

King writes:

My colleague Dan Gallagher has been using this word (Phil: price degouging) around the department the last few days to refer to what's happened as gas prices have fallen.

Yet I hear today that Scott Adams is running a Weaseliest Behavior poll in which "gas price gouging" is listed as an option.  So why not gas price degouging?

With gas price gouging, a firm is trying to stick it to the consumer.  Competition between sellers pushes prices down and one could argue that each firm is trying to stick it to his/her rivals.  Is this not reprehensible and does this not deserve to be controlled (he asks sarcastically).

Here is the most recent chart at Minnesotagasprices.com

How to Keep Your Opponent from Scoring

From the Miami Herald:

University of Miami athletic director Paul Dee said some spectators might be relocated at the Orange Bowl for Saturday's homecoming game against North Carolina and offerings at concession stands could be limited as a result of Hurricane Wilma. Dee surveyed the Orange Bowl with city officials Wednesday and discovered no major damage aside from the loss of the light towers.

...  Also, the scoreboard is working, except for the visitor's score. (emphasis Phil's)

Weird College Nicknames

I may have found the strangest collegiate sports nickname:  The Rhode Island School of Design refers to its hockey team as The Nads.

By the way, the main RISD website needs to get improved.  Sure, having moving links may seem cool, but they are a pain to use.

Paying to Make the Grade

(Crossposted at The Sports Economist)

NCAA officials and officials of member schools have been fretting for some time over the low graduation rates of student-athletes, especially in football and men's basketball.  Recently, NCAA officials changed the way they measure academic progress and story the data told wasn't pretty.  Now members of the NCAA board of directors decided to provide financial incentives to schools to improve their graduation rates.  From the Chronicle of Higher Education daily alert ($$$ req'd):

A plan approved on Thursday by the National Collegiate Athletic Association's Division I Board of Directors would pay colleges up to $100,000 each if their athletes do particularly well in the classroom and a high percentage of them graduate every year.

The biggest payouts would go to colleges whose athletics programs make significant improvements in graduating players, while some money would also go to programs that are struggling academically and need assistance.

According to the plan, the NCAA will provide a total of $10 million to all member schools.  The breakdown of how it is intended to be used:

Half the money, or $5-million annually, would go to institutions whose athletics programs make big improvements in their academic performance over the previous year. An additional $3-million a year would be given to institutions that can demonstrate that they have little money for tutors or programs that help athletes do well in the classroom. The rest of the money would reward athletics programs that show extraordinary academic performance.

The first step is a step in the right direction because it provides an incentive at the margin to schools to improve their athletes' academic performance.  But the main problem is that those who will have to shoulder the burden of work (the student athletes) still won't see any direct financial compensation for their efforts. 

As an analogy, suppose a university wanted to offer Friday night classes and Saturday day classes.  As an incentive, the university offers each department some amount of funds for each Friday Night/Saturday class taught but with a stipulation that none of that money can go directly to the professor.  My guess is that there will be less (very little/no?) enthusiasm to teach these classes relative to a program where the professor gets a bonus for teaching such classes.

I'm not so crazy about the second step (providing $3 million to schools that don't have the resources).   Athletic departments have some leeway over how they spend their budgets.  Since money is fungible, money spent on, say, training facilities is money not spent on tutoring.  If some department's officials claim that they do not have much money available for tutoring, how do we know that this isn't because they have chosen to spend their funds somewhere else?  This second step gives departments the perverse incentive to decrease their spending on tutoring etc. to obtain more cash from the NCAA.  I imagine NCAA officials realize this so we'll probably see a further burgeoning of the bureaucracy to combat it.

The third step, rewarding each school with good academic performance, will work like an extra credit assignment where everyone who gets an A gets a candy bar.  Students who are most likely to get a candy bar from this assignment are those who would have gotten an A anyways.